 Dynamic bargaining in households (with application to Bangladesh)Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley Abstract: Much recent empirical work on intra-household allocation uses the axiomatic Nash Bargaining model to make predictions about how the distribution of consumption within the household will respond to individuals' income shocks. However, one of the basic axioms underlying this approach is that allocations will be Pareto optimal, so forward-looking, risk adverse household members ought to be expected to smooth away any such response to income shocks-Pareto optimality seems to be too strong in a dynamic setting. In this paper we use explicitly dynamic framework and replace the axiom of Pareto optimality with a weaker notion of efficiency. We give a simple algorithm for computing allocations, and construct an extended example, meant to model the effects of Grameen Bank lending on intra-household allocation in Bangladesh. The model resolves a puzzle in the literature, namely, it predicts that women borrowers will often voluntarily surrender control ("pipeline") their loans to their husbands. Keywords: bargaining; limited commitment; risk-sharing; intra-household allocation; Grameen Bank (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cdl:agrebk:qt1t52k4c5 Access Statistics for this paper More papers in Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley Contact information at EDIRC. |
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