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

KU Leuven Discussion Paper Series DPS14.21

20 Pages Posted: 14 Oct 2014

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Karen van der Wiel

CPB Netherlands Bureau of Economic Policy Analysis

Arthur van Soest

Tilburg University; Netspar; RAND Corporation; Institute for the Study of Labor (IZA)

Frederic Vermeulen

KU Leuven

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Date Written: July 14, 2014

Abstract

We model consumption and labor supply behavior of a couple in a non-cooperative setting. 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, in which case each partner’s influence depends on the relative wage rates (Split Might). The model is illustrated empirically using a sample drawn from the Consumer Expenditure Survey (CEX) where expenditures on children’s goods are a public good in both spouses’ preferences. It turns out that the spending pattern reflects the husband’s preferences in about 54% of the couples in our sample. Still, in an important minority of the households (about 45%), the wife acts as a dictator. Somewhat less than 1% of the couples is characterized by a split might regime.

Keywords: Consumption, labor supply, intra-household allocation, non-cooperative model, public goods

JEL Classification: D11, D12, D13

Suggested Citation

Boone, Jan and van der Wiel, Karen and van Soest, Arthur H. O. and Vermeulen, Frederic, Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply (July 14, 2014). KU Leuven Discussion Paper Series DPS14.21, Available at SSRN: https://ssrn.com/abstract=2509259 or http://dx.doi.org/10.2139/ssrn.2509259

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

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Tilburg, 5000 LE
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Karen Van der Wiel

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
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Arthur H. O. van Soest

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Netspar

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Tilburg, 5000 LE
Netherlands

RAND Corporation ( email )

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1776 Main Street
Santa Monica, CA 90407-2138
United States

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Frederic Vermeulen

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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