Decision-Making in Complex Households

Duncan Thomas and Marcos Rangel

No 14278, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Extremely rich data on farm households in Burkina Faso are used to test whether resource are allocated Pareto efficiently. The complexity of household structures, including multi-generation and polygynous households, is taken into account to developing tests from theoretical models of behavior. Credible measures of bargaining power are constructed exploiting the fact that individuals within a household have well-defined property rights over the plots they own. Using data on consumption choices, we establish that in farm households headed by a monogamous couple (with no co-resident adult sons), resource allocations are consistent with efficiency. In more complex household structures, including polygynous households, efficiency in allocations is not rejected in models that allow more than two household members to have agency in decision-making. In contrast, tests for efficiency based on whether the same farm households maximize profits by equating marginal products across plots are rejected for all household types. Further, these same tests indicate individuals do not equate marginal products across their own plots. We conclude, therefore, that tests of models of resource allocation based on production-side decisions are likely to be misleading. In contrast, the consumption-side tests provide novel insights into the nature of decision-making within complex households.

Keywords: Household resource allocation; Pareto efficiency; Production; Consumption (search for similar items in EconPapers)
JEL-codes: J1 O13 Q15 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-agr and nep-cdm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP14278 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14278

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14278

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().