Economics of the Household: Where Do We Stand? Society of Economics - - PowerPoint PPT Presentation

Economics of the Household: Where Do We Stand?

Society of Economics of the Household Annual Meeting Pierre-André Chiappori

Columbia University

PSE, May 2018

Chiappori (Columbia University) Economics of the Household PSE, May 2018 1 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s Late 80s - early 90s: a revival

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s Late 80s - early 90s: a revival

New ‘non unitary’ approaches (non cooperative, collective,...)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s Late 80s - early 90s: a revival

New ‘non unitary’ approaches (non cooperative, collective,...) New data sets

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s Late 80s - early 90s: a revival

New ‘non unitary’ approaches (non cooperative, collective,...) New data sets New empirical works

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

Economics of the household: back to the future

Founding father: Gary Becker → lots of works in the 60s, 70s Late 80s - early 90s: a revival

New ‘non unitary’ approaches (non cooperative, collective,...) New data sets New empirical works

Recently: revival of the matching literature

Chiappori (Columbia University) Economics of the Household PSE, May 2018 2 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky) Identifiability (integrability)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky) Identifiability (integrability)

Weaknesses of the unitary model

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky) Identifiability (integrability)

Weaknesses of the unitary model

Theory: violates methodological individualism; disregards ‘power’

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky) Identifiability (integrability)

Weaknesses of the unitary model

Theory: violates methodological individualism; disregards ‘power’ Welfare: neglects intrahousehold inequality

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

The Twilight of the Unitary Model

Early works: the unitary model is paramount → various justifications:

Pragmatic (most of the empirical literature) Samuelson (Fixed welfare index: W

• Ua, Ub

) Becker: Rotten Kid Theorem → start from a criticism of Samuelson; but requires strong assumptions (in particular, TU: Bergstrom 1989)

Upsides of the unitary model: based on known foundations

Testability (Slutsky) Identifiability (integrability)

Weaknesses of the unitary model

Theory: violates methodological individualism; disregards ‘power’ Welfare: neglects intrahousehold inequality Empirics: several empirical falsifications: Slutsky (Browning Chiappori 1998, Kapan 2009, Vermeulen 2005), Income Pooling (Thomas 1990, Lundberg et al 1997, Duflo 2003, Attanasio Lechene 2014,...)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 3 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc.

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc. Based on non cooperative provision of public goods

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc. Based on non cooperative provision of public goods Main problem: predictions

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc. Based on non cooperative provision of public goods Main problem: predictions

Income pooling (Bergstrom Blume Varian 1986, Browning 2000)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc. Based on non cooperative provision of public goods Main problem: predictions

Income pooling (Bergstrom Blume Varian 1986, Browning 2000) Specialization and ‘separate spheres’ (Browning Chiappori Lechene 2010, Doepke Tertilt 2014)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Non Unitary Models: the Non Cooperative Approach

Pioneered by Leuthold (1968), Ashworth and Ulph (1981), Bergstrom, Blume, and Varian (1986) More recently: Browning (2000), Chen and Woolley (2001), Del Boca and Flinn (2012, 2014), Boone et al (2014), d’Aspremont and Dos Santos Ferreira (2014, 2017), Doepke and Tertilt (2014), etc. Based on non cooperative provision of public goods Main problem: predictions

Income pooling (Bergstrom Blume Varian 1986, Browning 2000) Specialization and ‘separate spheres’ (Browning Chiappori Lechene 2010, Doepke Tertilt 2014)

→ largely counterfactual (especially with domestic production)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 4 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling income shocks: renegotiation versus insurance

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling income shocks: renegotiation versus insurance

‘Distribution factors’ (e.g., divorce laws: CFL 2002, Voena 2015)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling income shocks: renegotiation versus insurance

‘Distribution factors’ (e.g., divorce laws: CFL 2002, Voena 2015) In particular, policies (targeting)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling income shocks: renegotiation versus insurance

‘Distribution factors’ (e.g., divorce laws: CFL 2002, Voena 2015) In particular, policies (targeting) The marriage market

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Cooperative Approach: the Collective Model

Basic assumption: efficiency Translation: max Ua + µUb where µ Pareto weight → µ as summarizing power : Power matters In general, µ may be a function of:

Incomes (and wages, prices,...)

explains violations of income pooling income shocks: renegotiation versus insurance

‘Distribution factors’ (e.g., divorce laws: CFL 2002, Voena 2015) In particular, policies (targeting) The marriage market

In all cases, need for a ‘metatheory’ of how Pareto weights are determined → Back to Becker: Pareto weight as a market-clearing ‘price’

Chiappori (Columbia University) Economics of the Household PSE, May 2018 5 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models!

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Upsides:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Upsides:

very tractable (surplus maximization, i.e. linear optimization)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Upsides:

very tractable (surplus maximization, i.e. linear optimization) clean distinction between aggregate behavior and intrahousehold allocation

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Upsides:

very tractable (surplus maximization, i.e. linear optimization) clean distinction between aggregate behavior and intrahousehold allocation

Cost: back to the unitary model

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Collective Model and the marriage market

Basic idea (Shapley Shubik, Becker): equilibrium on the marriage market determines:

matching patterns (who marries whom) division of the surplus (who gets what) → Pareto weights!

Main feature: heterogeneity → hedonic models! Standard reference: matching under Transferable Utility (TU)

Upsides:

very tractable (surplus maximization, i.e. linear optimization) clean distinction between aggregate behavior and intrahousehold allocation

Cost: back to the unitary model

More general: Imperfectly Transferable Utility (ITU)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 6 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce) Therefore second best efficiency: Maximize ex ante efficiency under these constraints

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce) Therefore second best efficiency: Maximize ex ante efficiency under these constraints Solution (Kocherlakota 1996, Ligon Thomas Worrall 2002):

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce) Therefore second best efficiency: Maximize ex ante efficiency under these constraints Solution (Kocherlakota 1996, Ligon Thomas Worrall 2002):

Pareto weights constant unless a constraint is violated...

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce) Therefore second best efficiency: Maximize ex ante efficiency under these constraints Solution (Kocherlakota 1996, Ligon Thomas Worrall 2002):

Pareto weights constant unless a constraint is violated... ... then changes so that it is exactly satisfied ...

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Commitment and dynamics in the collective model

Static versus dynamic efficiency: commitment issues Commitment: various frameworks

Full commitment → back to the static model No commitment: renegotiation at each period (BIM, Lundberg Pollak) Limited commitment (Mazzocco 2001, 2007, Chiappori Mazzocco 2017)

The limited commitment framework:

Constraints restricting individuals’ ability to commit (e.g.: divorce) Therefore second best efficiency: Maximize ex ante efficiency under these constraints Solution (Kocherlakota 1996, Ligon Thomas Worrall 2002):

Pareto weights constant unless a constraint is violated... ... then changes so that it is exactly satisfied ... ... in particular, Pareto weights follow a Markovian process

Chiappori (Columbia University) Economics of the Household PSE, May 2018 7 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual New approach (‘indifference scales’: simultaneous estimation of domestic production patterns (economies of scale, etc.) and intrahousehold allocations → Browning Chiappori Lewbel 2006, Dunbar Lewbel Pendakur 2013, 2017,...

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual New approach (‘indifference scales’: simultaneous estimation of domestic production patterns (economies of scale, etc.) and intrahousehold allocations → Browning Chiappori Lewbel 2006, Dunbar Lewbel Pendakur 2013, 2017,... Revealed preferences approach: Cherchye et al. (2007, 2009, 2011, 2014,...)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual New approach (‘indifference scales’: simultaneous estimation of domestic production patterns (economies of scale, etc.) and intrahousehold allocations → Browning Chiappori Lewbel 2006, Dunbar Lewbel Pendakur 2013, 2017,... Revealed preferences approach: Cherchye et al. (2007, 2009, 2011, 2014,...) Can address intrahousehold inequality with (most) available data sets

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual New approach (‘indifference scales’: simultaneous estimation of domestic production patterns (economies of scale, etc.) and intrahousehold allocations → Browning Chiappori Lewbel 2006, Dunbar Lewbel Pendakur 2013, 2017,... Revealed preferences approach: Cherchye et al. (2007, 2009, 2011, 2014,...) Can address intrahousehold inequality with (most) available data sets External validation: Bargain Lacroix Tiberti 2018

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions

Intrahousehold allocation and inequality

Standard view: only inequality across households considered Individuals: equivalence scales → implicitly assumes equal (or fair) allocation → largely counterfactual New approach (‘indifference scales’: simultaneous estimation of domestic production patterns (economies of scale, etc.) and intrahousehold allocations → Browning Chiappori Lewbel 2006, Dunbar Lewbel Pendakur 2013, 2017,... Revealed preferences approach: Cherchye et al. (2007, 2009, 2011, 2014,...) Can address intrahousehold inequality with (most) available data sets External validation: Bargain Lacroix Tiberti 2018 Policy consequences: Donni (2009), Lise Seitz (2011), Bargain et al (2011), CSW (2017),...

Chiappori (Columbia University) Economics of the Household PSE, May 2018 8 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ...

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ... ... particularly for fertility and HC investment in children human capital

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ... ... particularly for fertility and HC investment in children human capital See Chiappori, Costa Dias, Meghir (2017, 2018)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ... ... particularly for fertility and HC investment in children human capital See Chiappori, Costa Dias, Meghir (2017, 2018) Important implications for:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ... ... particularly for fertility and HC investment in children human capital See Chiappori, Costa Dias, Meghir (2017, 2018) Important implications for:

the dynamics of inequality (‘inequality spiral’, CSW 2017)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Joint estimation of matching and behavior

Intuition: any assumption on the economic gains from marriage has implication for the type of matching one should observe Examples:

Chores and specialization (‘Becker 1’): negative assortative matching Investment in children human capital (‘Becker 2’): positive assortative matching (if parental HC is an input)

Therefore the estimation of models of behavior should be related to the type of matching one observes ... ... particularly for fertility and HC investment in children human capital See Chiappori, Costa Dias, Meghir (2017, 2018) Important implications for:

the dynamics of inequality (‘inequality spiral’, CSW 2017) the long term consequences of policy changes

Chiappori (Columbia University) Economics of the Household PSE, May 2018 9 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights?

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’?

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children?

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Empirically, huge socio-demographic shocks, generating ‘natural experiments’ and calling for a precise analysis:

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Empirically, huge socio-demographic shocks, generating ‘natural experiments’ and calling for a precise analysis:

One child policy in China: spectacular shift in sex ratio

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Empirically, huge socio-demographic shocks, generating ‘natural experiments’ and calling for a precise analysis:

One child policy in China: spectacular shift in sex ratio Generally, sex ratio unbalances observable in many countries (India, ...), with both geographical and time variations

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Empirically, huge socio-demographic shocks, generating ‘natural experiments’ and calling for a precise analysis:

One child policy in China: spectacular shift in sex ratio Generally, sex ratio unbalances observable in many countries (India, ...), with both geographical and time variations Dramatic changes in female education, both in developed countries (CSW 2017) and in developing ones (e.g. Indonesia)

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10

Conclusions: a booming literature, many directions (cont.)

Dynamics of household formation and dissolution

Non unitary models are needed to analyze household formation and dissolution Various theoretical issues:

Is divorce efficient? What are the post-divorce Pareto weights? Remarriage: is there a ‘remarriage market’? Impact on savings? On investments? On children? Is there an asymmetry between genders regarding incomes? etc.

Empirically, huge socio-demographic shocks, generating ‘natural experiments’ and calling for a precise analysis:

One child policy in China: spectacular shift in sex ratio Generally, sex ratio unbalances observable in many countries (India, ...), with both geographical and time variations Dramatic changes in female education, both in developed countries (CSW 2017) and in developing ones (e.g. Indonesia)

Conclusion: long life to the SEHo!

Chiappori (Columbia University) Economics of the Household PSE, May 2018 10 / 10