Intra-Household Allocation of Time and Resources: Empirical Evidence on a Sample of Italian Households with Young Children

This paper examines the labour supply decision of the household when the presence of pre-school children, creating non-separabilities in the use of time, is explicitly taken into account. A set of nested tests is obtained from the standard household utility model and from the collective one, both including a household production function measuring the quality of time provided to the children. The application of the tests to a sample of Italian households shows that the collective model considered in this paper cannot be rejected. For this demographic group we also find enough evidence against the income pooling hypothesis and against the Slutsky inter-person symmetry condition. However, the identification of the income sharing parameters shows that the distribution of the household non-labour income does not affect the household labour supply system. We also provide a measure of the bias implicit in the standard household utility approach, by comparing the labour supply elasticiticies obtained from the two models.