The Intrafamily Allocation of Goods - How to Separate the Men from the Boys

Abstract

The paper integrates the basic principles of consumption theory and the economics of human resources to generate a powerful method for estimating the distribution of consumption between parents and children. Invoking the assumption of separability between parents' and children's consumption and the corresponding assumption of two-stage budgeting, it is shown that one can estimate the parents' share in total consumption by analyzing the effect of demographic changes on the consumption of adult goods (i.e., goods consumed exclusively by parents). Using the U.S. 1972/73 Consumption Expenditure Survey it is found that white married families tend to allocate about three-quarters of their consumption to parents and one quarter to children. The children's share of consumption in black families does not fall short of those in white families, and the share in white families where the father is absent is even higher. The share increases with the number of children, uut the absolute level of consumption per child declines. These findings are quite robust to changes in functional form and data-base.