Assessing the Stability of the Collective Labour Supply Model: The Russian Financial Crisis as a Natural Experiment

Natalia Radtchenko and Guy Lacroix
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Natalia Radtchenko: Crest
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No 2007-09, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper proposes a test of the collective model of the household behavior. Theapplied model admits both interior and corner solutions on working hours (Donni (2003)).Each household member has his or her individual preferences; the household choices arePareto optimal and defined by the sharing rule describing the intra-household decisionmaking.This is the first paper in analysing the sharing rule stability in the framework of thecollective model. The test is carried out using Russian data from the RLMS (RussiaLongitudinal Monitoring Survey). The episode of the financial crisis of 1998 is exploited toinvestigate the stability of the sharing rule. The empirical model is based on the recent paperof Blomem (2004) which is generalized to allow the sharing rule to vary across years.The results show that the sharing rule parameters changed drastically between theperiods before and after the crisis. Thus, a modification in the household behaviour iscaptured, which could not be done using a traditional unitary model. The hypothesis of thestability of the sharing rule parameters can not be accepted in the context of changing socialor economic environment.

Pages: 1
Date: 2007
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