Modes of Spousal Interaction and the Labor Market Environment

40 Pages Posted: 13 Mar 2006

See all articles by Daniela Del Boca

Daniela Del Boca

University of Turin - Department of Economics; IZA Institute of Labor Economics; Centre for Household, Income, Labour and Demographic Economics (CHILD)

Christopher J. Flinn

New York University -Leonard N. Stern School of Business - Department of Economics; IZA Institute of Labor Economics

Date Written: March 2006

Abstract

We formulate a model of household behavior in which cooperation is costly and in which these costs vary across households. Some households rationally decide to behave noncooperatively, which in our context is an efficient outcome. An intriguing feature of the model is that, while the welfare of the spouses is continuous in the state variables, labor supply decisions are not. Small changes in state variables may result in large changes in labor supplies when the household switches its mode of behavior. We estimate the model using a nationally representative sample of Italian households and find that the costly cooperation model significantly outperforms a noncooperative model. This suggests the possibility of attaining large gains in aggregate labor supply by adopting policies which promote cooperative household behavior.

Keywords: household time allocation, Nash bargaining, Nash equilibrium, maximum

JEL Classification: C79, D19, J22

Suggested Citation

Del Boca, Daniela and Flinn, Christopher J., Modes of Spousal Interaction and the Labor Market Environment (March 2006). IZA Discussion Paper No. 2005. Available at SSRN: https://ssrn.com/abstract=890283

Daniela Del Boca (Contact Author)

University of Turin - Department of Economics ( email )

Via Po, 53
Torino, 10124
Italy

IZA Institute of Labor Economics

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

Centre for Household, Income, Labour and Demographic Economics (CHILD)

Turin, TO
Italy

Christopher J. Flinn

New York University -Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

IZA Institute of Labor Economics

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

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