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Dynamic bargaining in households (with application to Bangladesh)

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  • Ligon, Ethan

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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Bibliographic Info

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 qt1t52k4c5.

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Date of creation: 09 May 2002
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Handle: RePEc:cdl:agrebk:qt1t52k4c5

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Related research

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

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Cited by:
  1. Zaki Wahhaj & Thi Minh-Phuong Ngo, 2010. "Microfinance and Gender Empowerment," Economics Series Working Papers CSAE WPS/2010-34, University of Oxford, Department of Economics.
  2. Del Boca, Daniela & Flinn, Christopher, 2012. "Endogenous household interaction," Journal of Econometrics, Elsevier, vol. 166(1), pages 49-65.
  3. Natalie Chen & Paola Conconi & Carlo Perroni, 2007. "Women's Earning Power and the "Double Burden" of Market and Household Work," SOEPpapers on Multidisciplinary Panel Data Research 20, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Gustavo J. Bobonis & Melissa González-Brenes & Roberto Castro, 2013. "Public Transfers and Domestic Violence: The Roles of Private Information and Spousal Control," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 179-205, February.
  5. Chen, Natalie & Conconi, Paola & Perroni, Carlo, 2006. "Does Migration Empower Married Women?," CEPR Discussion Papers 5559, C.E.P.R. Discussion Papers.
  6. Steven Stern & Leora Friedberg, 2010. "Marriage, Divorce, and Asymmetric Information," Virginia Economics Online Papers 385, University of Virginia, Department of Economics.
  7. Vegard Iversen & Cecile Jackson & Bereket Kebede & Alistair Munro & Arjan Verschoor, 2006. "What`s love got to do with it? An experimental test of household models in East Uganda," Economics Series Working Papers WPS/2006-01, University of Oxford, Department of Economics.
  8. Vegard Iversen et al, 2009. "Does one size fit all? An experimental test of household models in East Uganda," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 09-04, Indian Statistical Institute, New Delhi, India.
  9. Luke, Nancy & Munshi, Kaivan, 2011. "Women as agents of change: Female income and mobility in India," Journal of Development Economics, Elsevier, vol. 94(1), pages 1-17, January.

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