Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply

Jan Boone, Frederic Vermeulen and Karen van der Wiel

No 7367, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It is unlikely that husbands and wives always agree on exactly what public goods to buy. Nor do they necessarily agree on how many hours to work with obvious consequences for the household budget. We therefore model consumption and labor supply behavior of a couple in a non-cooperative setting by adopting a Nash approach. Using minimal assumptions, we prove that demand for public goods is characterized by three regimes. It is either determined by the preferences of one of the partners only (Husband Dictatorship or Wife Dictatorship), or by both spouses' preferences where a partner's influence depends on the spouses' relative wage rates (Split Might). These regimes imply a kinked nature of the couple's aggregate demand curves. By imposing more structure on the model, we can derive testable implications on observed demand for public goods and labor supply that allow testing the model against the standard unitary model where a couple behaves as a single decision maker. The model is applied to a sample drawn from the Consumer Expenditure Survey (CEX) whereby we explicitly focus on expenses on children's goods that act as a public good in the spouses' preferences. We find that for couples with two or three children the standard unitary model is strongly rejected in favor of our non-cooperative model. Moreover, it turns out that for the majority of these couples, there is a Wife Dictatorship in the sense that the spending pattern is according to her preferences.

Keywords: Consumption; Intra-household allocation; Labor supply; Non-cooperative model; Public goods (search for similar items in EconPapers)
JEL-codes: D11 D12 D13 (search for similar items in EconPapers)
Date: 2009-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP7367 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Kinky choices, dictators and split might. A non-cooperative model for household consumption and labor supply (2014)
Working Paper: Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply (2009)
Working Paper: Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply (2009)
Working Paper: Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply (2009)
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:7367

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7367

Access Statistics for this paper

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