Week 1
Income pooling
Intro
The importance of family as a productive unit has declined sharply due to changes such as:
• The ease of entering and exiting marriage
• Contraception
• Low child mortality
• Ability to have children outside of marriage
Under traditional economic theory children are public goods for the parents
With regards to roles of the sexes comparative advantage is employed:
• If the mother’s ratio of productivity at home relative to market wage exceeds that of the father
then she will raise the child
• The partners can then divide the gains in total output caused by specialisation
Neoclassical framework explains:
• The increase in female labour supply and decrease in fertility due to increase in opportunity cost
of women’s time in non market production as wages rose
• The correlation of child wage rates and make wage rates positively with fertility and negatively
with women’s market participation in agricultural societies where unskilled child labour is a
valuable family resource
There is high correlation in the school attainments if husbands and wives as they are complements,
this is assortative matching (marriage between people with similar characteristics)
As spouses in marriage care about each other and their children, but may have con icting interests
two models emerged
UNITARY MODEL COLLECTIVE MODEL
poolingoccurs impliesneutralizationof Gcooperative solutionthatrequiresbinding
orinformally
targetedtransfers i commitmentsenforcedformally
t
onlythe
sumofincome c ontrol the
individualwould
r esourcesresourcesthe
Partible if marriage
the
effectschoicesnot 1
distribution income naanottormenorietneyweretodivorceincreaseb argainingpower
betweenthem of
MaxUlaae
are
sit pig y I atly.ge
i ifthereispooling
a t.ly.pi.pl
i
then
EyEj
NB: spouses having the same preferences does NOT mean they pool resources, as unless
preferences are homothetic, marginal choices di er depending on income distribution
Data
Variation in microeconomic data occurs due to di erences in preferences, characteristics,
Income pooling
Intro
The importance of family as a productive unit has declined sharply due to changes such as:
• The ease of entering and exiting marriage
• Contraception
• Low child mortality
• Ability to have children outside of marriage
Under traditional economic theory children are public goods for the parents
With regards to roles of the sexes comparative advantage is employed:
• If the mother’s ratio of productivity at home relative to market wage exceeds that of the father
then she will raise the child
• The partners can then divide the gains in total output caused by specialisation
Neoclassical framework explains:
• The increase in female labour supply and decrease in fertility due to increase in opportunity cost
of women’s time in non market production as wages rose
• The correlation of child wage rates and make wage rates positively with fertility and negatively
with women’s market participation in agricultural societies where unskilled child labour is a
valuable family resource
There is high correlation in the school attainments if husbands and wives as they are complements,
this is assortative matching (marriage between people with similar characteristics)
As spouses in marriage care about each other and their children, but may have con icting interests
two models emerged
UNITARY MODEL COLLECTIVE MODEL
poolingoccurs impliesneutralizationof Gcooperative solutionthatrequiresbinding
orinformally
targetedtransfers i commitmentsenforcedformally
t
onlythe
sumofincome c ontrol the
individualwould
r esourcesresourcesthe
Partible if marriage
the
effectschoicesnot 1
distribution income naanottormenorietneyweretodivorceincreaseb argainingpower
betweenthem of
MaxUlaae
are
sit pig y I atly.ge
i ifthereispooling
a t.ly.pi.pl
i
then
EyEj
NB: spouses having the same preferences does NOT mean they pool resources, as unless
preferences are homothetic, marginal choices di er depending on income distribution
Data
Variation in microeconomic data occurs due to di erences in preferences, characteristics,
