Academic journal article Journal of Marriage and Family

Sharing of Resources within the Family and the Economics of Household Decision Making

Academic journal article Journal of Marriage and Family

Sharing of Resources within the Family and the Economics of Household Decision Making

Article excerpt

Over the last 3 decades, economic models have been developed that recognize that potentially conflicting interests may shape household decisions and the sharing of resources within families. This article provides an overview of how decision making within households has been modeled within economics, presents the main benefits and limitations of those models, and critically assesses their usefulness to researchers from other disciplines interested in the within- household distribution of resources. The main focus is on the theory, empirical application, and results of the currently dominant collective models, but the authors also look at developments that led up to them and some subsequent extensions and alternative approaches. Given the weight placed by policymakers and others on economic and quantitative evidence, it is incumbent on researchers of all disciplines to understand the achievements and limitations of the models used, explicitly or implicitly, to produce such evidence and the assumptions that lie behind them.

Key Words: collective models, family economics, family resource management, gender, inequality, rational choice.

The aim of this article is to provide a nontechnical overview of how decision making within households has been modeled within economics and to make the case for why researchers from other disciplines who are interested in the within-household distribution of resources might benefit from understanding the achievements and limitations of such models. Previous surveys (e.g., among others, Browning, Chiappori, & Weiss, 2011; Vermeulen, 2002) have been aimed more at those who take the benefits of economic modeling for granted; here our aim is to contribute more to debates on methodologies for within-household research and critically assess the usefulness of these models for that purpose.

Becker's ( 1981 ) path-breaking Treatise on the Family was the first to insist on the need for an economic model of how people with differing preferences living in multiperson households make decisions, a process misleadingly called household decision making. Until then, the outcomes of such collective decisions had been modeled using the tools of rational choice theory that had been developed for the analysis of individual decision making. Indeed, this practice of modeling the outcomes of household decisions as if they were made by individuals remains normal practice to this day in most theoretical and applied economic reasoning that is not directly concerned with understanding what goes on within households.

Why was it so important to develop economic models that opened up the previously impenetrable "black box" of the household? First, on theoretical grounds, rational choice theory would need the household as a group to hold consistent preferences and behave according to them. But when modeling collectivities within which interests may differ, such as multiperson households, there are no grounds for assuming such consistency of the group's preferences. Second, from a policy standpoint, assuming that a household behaves according to models developed for individuals precludes acknowledging the intrahousehold effects of policies, in particular that policies benefiting some household members may make others worse off. Finally, because multiperson households typically include both men and women, with intrahousehold roles and relationships structured by gender, modeling households as having internal relationships is necessary to explain one of the crucial sites of interaction between men and women; indeed, such models typically, though not exclusively, focus on male - female couples (with or without children). This makes these models a rare contribution to the economic modeling of gender issues, and, because they are designed to apply to all decisions made by household members, they can be used to analyze not only the allocation of financial and other resources but also many other crucial gender issues, such as the division of paid and unpaid labor within the household. …

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