Household bargaining over fertility: Theory and evidence from Malaysia

We develop and test a model of household bargaining over fertility when transfers between spouses are possible. The model makes precise how the fertility preferences of each spouse translate into fertility outcomes. We show this depends on whether or not spouses can commit to their future actions within marriage. If couples bargain with commitment, fertility outcomes take account of both spouses' fertility preferences and do not depend on the threat point in marital bargaining. If couples bargain without commitment, the influence of each spouse's fertility preference on fertility outcomes depends on the relevant threat point in marital bargaining, and the distribution of bargaining power. We test the models using household data from the Malaysia Family Life Survey. This data set contains information on each spouse's desired fertility level, as well as fertility outcomes. We exploit differences in threat points in marital bargaining across ethnic groups to help identify the underlying bargaining model. The evidence suggests couples bargain without commitment.     

Endogenous gender power,household labor supply and the demographic transition

We present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women. Bargaining between the wife and the husband forms the basis of household decisions. Marital bargaining power is determined according to the incomes of the spouses, which in turn help to determine their reservation utility levels outside the marriage. The endogeneity of bargaining power introduces a non-cooperative element to the couples' decision-making problem because both the husbands and the wives take into account how their pre-marital education decisions affect their marital power and the share they extract from household resources in the future. The model predicts that wives invest more than is Pareto efficient in their education in order to increase their bargaining power in marriage. As a consequence, couples have fewer children and consume more when exogenous structural changes lead women to invest more in education. A corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure.     

Marriage and employment participation with wage bargaining in search equilibrium

We build an equilibrium search model where married couples make joint decisions on home production and labour market participation and analyse the implications of our results for a frictional marriage market. A worker's bargaining position reflects their productivity, and the productivity and employment status of their spouse. People sometimes accept transitory jobs only to raise the spouse's long-term wages. Firms sometimes reduce turnover by unilaterally increasing a worker's wage, ensuring that the spouse stays at home.     

Roots of gender equality: the persistent effect of beguinages on attitudes toward women

This paper is concerned with the historical roots of gender equality. It proposes and empirically assesses a new determinant of gender equality: gender-specific outside options in the marriage market. In particular, enlarging women’s options besides marriage—even if only temporarily—increases their bargaining power with respect to men, leading to a persistent improvement in gender equality. We illustrate this mechanism focusing on Belgium, and relate gender-equality levels in the 19th century to the presence of medieval, female-only communities called beguinages that allowed women to remain single amidst a society that traditionally advocated marriage. Combining geo-referenced data on beguinal communities with 19th-century census data, we document that the presence of beguinages contributed to decrease the gender gap in literacy. The reduction is sizeable, amounting to a 12.3% drop in gender educational inequality. Further evidence of the beguinal legacy is provided leveraging alternative indicators of female agency.

     

Do children of the first marriage deter divorce?

In terms of economics, individuals divorce if their expected gains from marriage fall short of their expected utility outside the current marriage, and children represent a marriage-specific type of investment, which generally increases the value of marriage for the spouses. However, children may also disrupt marital stability as they will induce dramatic changes into the household allocation of money and time. In particular, children conceived before or after first marriage may be valued differently by the spouses and this may lead to marital conflicts. It is difficult to assign a priori the direction of the effect of children on marriage stability, and causality may run either way, as couples who anticipate a separation are more likely to have fewer children than those who are happy together, while children born before first marriage may be associated with a lower marriage attachment of their parents. Here, we follow an empirical approach and take advantage of the richness of the data on pre-marital history from the 24 waves of the National Longitudinal Survey of Youth79, to estimate the effect of children conceived before or after first marriage on marital stability. We find a significant deterrent effect of young children conceived during first marriage to the likelihood of divorce, while children conceived before first marriage are found to have a disruptive effect on marital stability.     

Household bargaining and the design of couples’ income taxation

This paper studies the design of couples’ income taxation when consumption and labor supply decisions within the couple are made by maximizing a weighted sum of the spouses’ utilities; bargaining weights are given but specific to each couple. Information structure and labor supply decisions follow the Mirrleesian tradition. However, while the household's total consumption is publicly observable, the consumption levels of the individual spouses are not observable. With a utilitarian social welfare function we show that the expression for a spouses’ marginal income tax rate includes a “Pigouvian” (paternalistic) and an incentive term. The Pigouvian term favors a marginal subsidy (tax) for the high-weight (low-weight) spouse, whose labor supply otherwise tends to be too low (high). The sign and the magnitude of the incentive term depends on the weight structure across couples. In some cases both terms have the same sign and imply a positive marginal tax for the low-weight spouse (who may be female) and a negative one for the high-weight spouse (possibly the male). This is at odds with the traditional Boskin and Sheshinski results. Our conclusions can easily be generalized to more egalitarian welfare functions. Finally, we present numerical simulations based on a calibrated specification of our model. The calculations confirm that the male spouse may well have the lower (and possibly even negative) marginal tax rate.     

Maternal Healthcare in Tajikistan: A Bargaining Framework

Abstract

This study examines women's declining use of maternal healthcare services in post-socialist Tajikistan. Using data from the 2003 and 2007 Tajikistan Living Standards Surveys (TLSS), the findings support previous evidence that a woman's use of prenatal and delivery care depends on her education, household income, and proximity to services. However, previous models have not specified who makes the decision to use maternal healthcare services. This study finds that in Tajikistan a woman shares decision making with her spouse and the eldest woman in the household. There is limited evidence that traditional proxies for bargaining power, such as relative earnings level, affect outcomes. The authors conclude that where women's exit options are limited, surveys evaluating the value of women's assets and their services in the home, as well as questions about decision making, will allow more refined measures of women's bargaining power.     

Bargaining power and enforcement in credit markets

In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has power that exceeds this threshold, her expected utility must go up whenever her outside options come down. But if the borrower has less power than this threshold, her expected payoff must come down with her outside options. In the former case a deterioration in outside options brought about, say, by better enforcement, must create a Lorenz improvement in state-contingent consumption. In particular, borrower consumption rises in all “bad” states in which loans are taken. In the latter case, in contrast, the borrower's consumption must decline, at least for all the bad states. These disparate findings within a single model permit us to interpret existing literature on credit markets in a unified way.     

Women's Empowerment and HIV Prevention in Rural Malawi

This study examines the impact of women's empowerment on attitudes toward HIV prevention using the Malawi Diffusion and Ideational Change Project (MDICP), a panel dataset of over 1,200 married women in rural Malawi from 1998 to 2008. Results indicate that an increase in women's bargaining power promotes adequate HIV prevention strategies, namely condom use within marriage and HIV-related spousal communication. Own income, language skills, and awareness of options outside marriage also play an important role. By estimating a constant for each individual in the sample, the analysis controls for the impact individual-specific, nonmeasurable characteristics have on attitudes toward prevention. It captures the impact of HIV campaigns and increases in HIV prevalence over time on prevention behavior by using (regional) time trends. The findings are highly comparable across different econometric specifications and suggest substantial gains from placing greater emphasis on women's empowerment to effectively combat the spread of HIV, particularly in developing countries.     

Profit Sharing,Credit Market Imperfections and Equilibrium Unemployment*

We investigate the interaction between labour and credit market imperfections for equilibrium unemployment in the presence of profit sharing. In a partial equilibrium with exogenous outside options, increased bargaining power of banks has adverse employment effects. In a general equilibrium with endogenous outside options, this relationship is frequently reversed; reduced credit market imperfections increase equilibrium unemployment if the labour market imperfections—measured by the bargaining power of trade unions—are sufficiently strong and the benefit–replacement ratio is sufficiently high. Finally, we show that higher bankruptcy risks increase equilibrium unemployment under similar conditions.     

Domestic violence and women's autonomy in developing countries: theory and evidence

Abstract This paper sets out a simple non‐cooperative model of resource allocation within the household in developing countries that incorporates domestic violence as a vehicle for enhancing bargaining power. We demonstrate that the extent of domestic violence faced by women is not necessarily declining in their reservation utilities, or necessarily increasing in their spouses’. Using the National Family Health Survey data of India for 1998–99, we isolate the effect of domestic violence on female autonomy, taking into account the possible endogeneity of domestic violence through the choice of appropriate instruments. We provide some evidence for the evolutionary theory of domestic violence, which argues that such violence stems from the jealousy caused by paternity uncertainty in our evolutionary past. The findings have strong policy implications suggesting that it will take more than an improvement in women’s employment options to address the problem of spousal violence.     

BARGAINING AMONG FARMERS,GOODWILL, AND THE SUCCESS OF COOPERATIVES

A model of concessional bargaining among farmers explains the success (or lack thereof) of cooperative institutions in rural farm settings in the developing regions. Concessional bargaining in day‐to‐day interactions generates goodwill, which helps smoothen future dealings amongst farmers as well as with outside agents. In particular, we model the existence of goodwill amongst farmers as enhancing their ability to collectively bargain with an outside dealer that buys their farm produce. Results suggest that when dealing with each other, farmers offer higher concessions when the risk of loss or reversal in bargaining power is high; however, the level of concession is also influenced by the degree of reciprocity and parameters that affect bargaining surplus. Findings provide further insights over the success of cooperative institutions in rural farm settings where inter‐farmer goodwill dynamics determines the cooperative's bargaining outcomes. Specifically, when farmers generously reciprocate each other's goodwill gestures, it leads to better outcomes through increasing their cooperative reservation price. In contrast, when the degree of reciprocity is lower, or when the risk of bargaining power switching is higher, farmers extract more surplus from other farmers, and this also lowers the cooperative's bargaining outcomes and makes the cooperative arrangement unviable in the long term.     

A Cournot–Nash Model of Family Decision Making

This paper models a two-person family. Each family member is utility maximising, yet family members are interdependent because of caring and public goods within the family. The two family members' interdependent utility maximisation problems are first solved using a non-cooperative, or Cournot–Nash, game theoretic framework. The Cournot–Nash equilibrium is then used as a threat point in a bargaining game. The paper provides a rigorous derivation of the properties of household demands, a full analysis of the determinants of intra-household resource allocation, including the effect of varying household bargaining power, and consideration of policy implications.     

Bargaining, search, and outside options

This paper studies a two-sided incomplete information bargaining model between a seller and a buyer. The buyer has an outside option, which is modeled as a sequential search process during which he can choose to return to bargaining at any time. Two cases are considered: In Regime I, both agents have symmetric information about the search parameters. We find that, in contrast to bargaining with complete information, the option to return to bargaining is not redundant in equilibrium. However, the no-delay result still holds. In Regime II, where agents have asymmetric information about the outside option, delay is possible. The solution characterizes the parameters for renegotiation and those for search with no return to the bargaining table.     

How do altruistic parental transfers affect the welfare gains of marriage?

This paper analyses the effects of altruistic parental transfers on the welfare gains of marriage. To that end, it develops a sequential game which, in a first stage, determines the optimum level of the transfer between the altruistic donor (the parent) and the recipient (the daughter/son). In the second stage, the levels of consumption and provision of a family good are deduced by way of a Nash bargaining solution, with the threat point being represented by divorce. We find that the degree of altruism of the recipient has a null effect on the gains in welfare derived from the marriage by the recipient’s spouse, and a positive effect on those derived by the recipient. Additionally, the degree of altruism of the donor has a positive effect on the gains in welfare derived from the marriage by the recipient’s spouse, and an ambiguous effect on those derived by the recipient.     

Marriage traditions and investment in education: The case of bride kidnapping

The cultural practice of bride kidnapping in Kyrgyzstan may alter the returns to education for young women in an ambiguous direction due to two competing effects. On the one hand, women facing a risk of kidnapping may reduce education investment due to uncertain returns. Alternatively, since kidnapping is less likely to occur while a woman is in school, women may increase education investment to lower their personal risk of being kidnapped into marriage. Understanding how education is affected by kidnapping risk allows us to better anticipate changes in education when the laws are enforced and the risk declines. We develop a two-period utility model to highlight the effects of kidnapping risk on education and to help identify those girls who are most likely to increase their education when faced with positive regional kidnapping risk and thus most likely to reduce education if the risk is eliminated. We test the implications of the theory empirically using the Life in Kyrgyzstan data. Difference-in-difference regression results point to a negative relationship between regional kidnapping rates and education, suggesting that the elimination of kidnapping is likely to induce higher education rates of women in Kyrgyzstan. The results are informative to the literature at the intersection of marriage traditions, women's bargaining power and education attainment.     

On Perceptions of Fairness: The Role of Valuations, Outside Options, and Information in Ultimatum Bargaining Games

This study examines fairness perceptions in ultimatum bargaining games with asymmetric payoffs, outside options, and different information states. Fairness perceptions were dependent on treatment conditions. Specifically, when proposers had higher chip values, dollar offers were lower than when responders had higher chip values. When responders had an outside option, offers were higher and were rejected less often than when proposers had an outside option. However, a given offer was rejected more often when responders had an outside option. Therefore, similar to the first mover advantage, the “advantaged” or “entitled” player received a higher monetary payoff than they would otherwise. When there was complete information about payoff amounts (payoff conversion rates and outside options), rejections occurred more often, and given offer amounts were rejected more often than when there was incomplete information. When there was incomplete information, offers were higher in the initial rounds than in the final rounds. These results suggest that proposers made offers strategically, making offers that would not be rejected, rather than out of a concern for fairness.     

The Scope of Anonymous Voluntary Bargaining Under Asymmetric Information

We present a model of anonymous collective bargaining where individuals'preferences and information may be significantly interdependent. We showthat the bargaining outcome becomes independent of individuals'preferences and information as the bargaining group increases in size. As acorollary, we show that anonymous voluntary bargaining completely fails inlarge groups. Either the difference between the bargaining outcome and thestatus quo vanishes as the size of the group becomes larger, or, thebargaining becomes coercive and results in a violation of at least someindividuals' rights. The result provides a rationale for the inherentdifficulty of reform in the presence of asymmetric information.
"There is nothing more difficult to carry out, nor more doubtful ofsuccess, nor more dangerous to handle, than to initiate a new order ofthings."
Niccolò Machiavelli, The Prince (1532)     

Income splitting, specialization, and intra-family distribution

Abstract Income splitting for tax purposes results in more specialization of wives, but does this in turn generate more gender inequality? In my dynamic bargaining model with a divorce threatpoint, I find that who controls the couple's labour supply plays a crucial role in establishing this link. If spouses choose their labour supply non‐cooperatively, only the husband's increase – but not her own decrease – in labour supply introduces a negative term in the wife's change in welfare. If the wife does not control her own labour supply, a decrease in her own labour supply introduces an additional negative term.     

STRATEGIC WITHHOLDING OF FIRM‐SPECIFIC SKILLS IN WAGE BARGAINING

The bargaining relationship between a firm and its incumbent worker who possesses firm‐specific human capital is examined. It is shown that the worker's ability to withhold his/her skills strategically increases his/her bargaining power. Multiple efficient as well as inefficient equilibria involving delays in negotiation are characterized. When the firm has outside options, the range of both efficient and inefficient equilibria shrinks; moreover, delays are shortened in inefficient equilibria. The model predicts that wages are procyclical.