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Modes of Spousal Interaction and the Labor Market Environment

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  • Del Boca, Daniela

    ()
    (University of Turin)

  • Flinn, Christopher

    ()
    (New York University)

Abstract

We formulate a model of household behavior in which cooperation is costly and in which these costs vary across households. Some households rationally decide to behave noncooperatively, which in our context is an efficient outcome. An intriguing feature of the model is that, while the welfare of the spouses is continuous in the state variables, labor supply decisions are not. Small changes in state variables may result in large changes in labor supplies when the household switches its mode of behavior. We estimate the model using a nationally representative sample of Italian households and find that the costly cooperation model significantly outperforms a noncooperative model. This suggests the possibility of attaining large gains in aggregate labor supply by adopting policies which promote cooperative household behavior.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2005.

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Length: 40 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2005

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Keywords: household time allocation; Nash bargaining; Nash equilibrium; maximum likelihood;

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References

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  1. Peter Kooreman & Arie Kapteyn, 1990. "On the Empirical Implementation of Some Game Theoretic Models of Household Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 584-598.
  2. Lundberg, S. & Pollak, R.A., 1991. "Separate Spheres Bargaining and the Marriage Market," Discussion Papers in Economics at the University of Washington 91-08, Department of Economics at the University of Washington.
  3. Richard Blundell & Pierre-Andre Chiappori & Thierry Magnac & Costas Meghir, 2002. "Collective Labor Supply: Heterogeneity and Nonparticipation," Research Unit Working Papers 0210, Laboratoire d'Economie Appliquee, INRA.
  4. Flinn, C.J., 1998. "Modes of Interaction Between Divorced Parents," Working Papers 98-04, C.V. Starr Center for Applied Economics, New York University.
  5. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
  6. Bourguignon, F. & Chiappori, P-A., 1991. "Collective Models of Household Behaviour: An Introduction," DELTA Working Papers 91-29, DELTA (Ecole normale supérieure).
  7. Steven Stern & Michael J. Brien & Lee A. Lillard, 1999. "Cohabitation, Marriage, and Divorce in a Model of Match Quality," Virginia Economics Online Papers 322, University of Virginia, Department of Economics.
  8. 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.
  9. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  10. 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.
  11. McElroy, Marjorie B & Horney, Mary Jean, 1990. "Nash-Bargained Household Decisions: Reply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 237-42, February.
  12. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-63, June.
  13. Fortin, B. & Lacroix, G., 1993. "A Test of the Neoclassical and Collective Models of Household Labour Supply," Papers 9335, Laval - Recherche en Politique Economique.
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Cited by:
  1. Eckstein, Zvi & Lifshitz, Osnat, 2009. "Dynamic Female Labor Supply," IZA Discussion Papers 4550, Institute for the Study of Labor (IZA).
  2. Daniela Del Boca & Christopher J. Flinn, 2005. "Household Time Allocation and Models of Behavior: A Theory of Sorts," Carlo Alberto Notebooks 8, Collegio Carlo Alberto, revised 2006.
  3. Alessandro Cigno, 2011. "The economics of marriage," CHILD Working Papers wp02_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  4. Antonio Romero-Medina & Matteo Triossi, 2007. "Games of Capacities: A (Close) Look to Nash Equilibria," Carlo Alberto Notebooks 52, Collegio Carlo Alberto.
  5. Bargain, Olivier & Moreau, Nicolas, 2005. "Cooperative Models in Action: Simulation of a Nash-Bargaining Model of Household Labor Supply with Taxation," IZA Discussion Papers 1480, Institute for the Study of Labor (IZA).

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