Most econometric models of intrahousehold behavior assume that household decisionmaking is efficient, i.e., utility realizations lie on the Pareto frontier. In this paper we investigate this claim by adding a number of participation constraints to the household allocation problem. Short-run constraints ensure that each spouse obtains a utility level at least equal to what they would realize under (inefficient) Nash equilibrium. Long-run constraints ensure that each spouse obtains a utility level equal to a least what they would realize by cheating on the efficient allocation and receiving Nash equilibrium payoffs in all successive periods. Given household characteristics and the (common) discount factor of the spouses, not all households may be able to attain payoffs on the Pareto frontier. We estimate these models using a Method of Simulated Moments estimator and data from one wave of the Panel Study of Income Dynamics. We find that the model with long-run participation constraint fits the data best, and that 6 percent of sample households are not able to attain efficient outcomes. To meet the long-run participation constraint, over 90 percent of "efficient" households are required to modify the ex ante Pareto weight of 0.5 for each spouse assumed to apply to all households.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number
109.
Find related papers by JEL classification: C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other D19 - Microeconomics - - Household Behavior - - - Other J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)