Decision-Making in Complex Households

48 Pages Posted: 3 Dec 2019 Last revised: 10 Dec 2022

Multiple version iconThere are 2 versions of this paper

Date Written: November 2019

Abstract

Extremely rich data on farm households in Burkina Faso are used to test whether resource are allocated Pareto efficiently. The complexity of household structures, including multi-generation and polygynous households, is taken into account to developing tests from theoretical models of behavior. Credible measures of bargaining power are constructed exploiting the fact that individuals within a household have well-defined property rights over the plots they own. Using data on consumption choices, we establish that in farm households headed by a monogamous couple (with no co-resident adult sons), resource allocations are consistent with efficiency. In more complex household structures, including polygynous households, efficiency in allocations is not rejected in models that allow more than two household members to have agency in decision-making. In contrast, tests for efficiency based on whether the same farm households maximize profits by equating marginal products across plots are rejected for all household types. Further, these same tests indicate individuals do not equate marginal products across their own plots. We conclude, therefore, that tests of models of resource allocation based on production-side decisions are likely to be misleading. In contrast, the consumption-side tests provide novel insights into the nature of decision-making within complex households.

Suggested Citation

Rangel, Marcos and Thomas, Duncan, Decision-Making in Complex Households (November 2019). NBER Working Paper No. w26511, Available at SSRN: https://ssrn.com/abstract=3496487

Marcos Rangel (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Duncan Thomas

Duke University ( email )

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