Point Estimates of Household Bargaining Power Using Outside Options

We propose measuring household bargaining power with partners' relative outside options. Our estimate of outside options is the sum of predicted earnings and observed unearned income. This estimation approach allows researchers to generate level estimates of bargaining power for each household, and in each period or state of the world, without making assumptions about utility functional forms. Instead, the main assumption we make is on the functional relationship between bargaining power and outside options. Our primary contribution is to provide researchers with a new measurement option that complements the existing suite of techniques. Paired with the contemporary household models presented in Chiappori and Mazzocco (2017), this new measurement approach opens the door to new analyses of household bargaining. After developing the measure, we present an application that demonstrates the nature of questions that can be answered with our approach. We present the first causal evidence on important outstanding policy questions: the extent to which the Government of Mexico's Progresa empowered women, and the subsequent impact of that empowerment on diet. We estimate that Progresa increased women's bargaining power by 35% from 1998 to 1999. We find that this empowerment caused a 10% increase in household demand for fruits and vegetables and an 8% increase in demand for animal products. We show that the marginal effect of power on diet has an inverse-U shape, with household nutritional attainment maximized when partners are relatively equal, and that this marginal effect is an increasing function of household income.