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Dynamic bargaining in households (with application to Bangladesh)

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Author Info
Ethan Ligon (University of California, Berkeley)

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Abstract

Much recent empirical work on intra-household allocation uses the axiomatic Nash Bargaining model to make predictions about how the distribution of consumption within the household will respond to individuals' income shocks. However, one of the basic axioms underlying this approach is that allocations will be Pareto optimal, so forward-looking, risk adverse household members ought to be expected to smooth away any such response to income shocks-Pareto optimality seems to be too strong in a dynamic setting. In this paper we use explicitly dynamic framework and replace the axiom of Pareto optimality with a weaker notion of efficiency. We give a simple algorithm for computing allocations, and construct an extended example, meant to model the effects of Grameen Bank lending on intra-household allocation in Bangladesh. The model resolves a puzzle in the literature, namely, it predicts that women borrowers will often voluntarily surrender control ("pipeline") their loans to their husbands.

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Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number 972.

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Date of creation: 09 May 2002
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Handle: RePEc:cdl:agrebk:972

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Related research
Keywords: bargaining; limited commitment; risk-sharing; intra-household allocation; Grameen Bank;

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.:

  1. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June. [Downloadable!] (restricted)
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  2. Khandker, S.R. & Khalily, B. & Khan, Z., 1995. "Grameen Bank: Performance and Sustainability," World Bank - Discussion Papers 306, World Bank.
  3. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Kocherlakota, Narayana R, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Blackwell Publishing, vol. 63(4), pages 595-609, October. [Downloadable!] (restricted)
  5. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December. [Downloadable!] (restricted)
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  6. Albert Marcet & Ramon Marimon, 1994. "Recursive Contracts," Economics Working Papers 337, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 1998. [Downloadable!]
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  7. Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June. [Downloadable!] (restricted)
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  8. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 209-44, January.
  9. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI). [Downloadable!]
  10. Thomas, D., 1989. "Intra-Household Resource Allocation: An Inferential Approach," Papers 586, Yale - Economic Growth Center.
  11. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February. [Downloadable!] (restricted)
  12. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
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  13. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2000. "Mutual Insurance, Individual Savings and Limited Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 216-246, April. [Downloadable!] (restricted)
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  14. Bourguignon, Francois & Chiappori, Pierre-Andre, 1992. "Collective models of household behavior : An introduction," European Economic Review, Elsevier, vol. 36(2-3), pages 355-364, April. [Downloadable!] (restricted)
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  15. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-49, June. [Downloadable!] (restricted)
  16. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Blackwell Publishing, vol. 54(4), pages 599-617, October. [Downloadable!] (restricted)
  17. Kehoe, Timothy J & Levine, David K, 1993. "Debt-Constrained Asset Markets," Review of Economic Studies, Blackwell Publishing, vol. 60(4), pages 865-88, October. [Downloadable!] (restricted)
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  18. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April. [Downloadable!] (restricted)
  19. Lundberg, Shelly & Pollak, Robert A, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-58, Fall. [Downloadable!] (restricted)
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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.)

  1. Natalie Chen & Paola Conconi & Carlo Perroni, 2007. "Women's Earning Power and the "Double Burden" of Market and Household Work," SOEPpapers 20, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  2. Pieter Serneels, 2004. "The Added Worker Effect and Intrahousehold Aspects of Unemployment," Development and Comp Systems 0409014, EconWPA. [Downloadable!]
  3. Gustavo J Bobonis & Roberto Castro & Melissa Gonzalez-Brenes, 2009. "Public Transfers and Domestic Violence: The Roles of Private Information and Spousal Control," Working Papers tecipa-362, University of Toronto, Department of Economics. [Downloadable!]
  4. Chen, Natalie & Conconi, Paola & Perroni, Carlo, 2006. "Does Migration Empower Married Women?," CEPR Discussion Papers 5559, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Shelly Lundberg & Robert A. Pollak, 2001. "Efficiency in Marriage," NBER Working Papers 8642, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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