Preferences over Leisure and Consumption of Siblings and Intra-Household Allocation

Children are increasingly treated as active members in the household. However, their preferences over consumption and leisure are rarely modelled. This paper considers heterogeneity in siblings' preferences over leisure and consumption and builds a theoretical and empirical model for children's time and consumption allocations in a household. We test the predictions of the model with unique data from Ethiopia, India, Peru and Vietnam which contain detailed information on time use and allocations of assignable goods for sibling pairs. We find that conditioning on observable variables, the residuals of these simultaneous decisions are significantly negatively correlated. This suggests that differences in siblings' relative time and consumption allocations are driven by their relative preferences over leisure and consumption rather than differences in parents' relative altruism. Families seem to function as market economies in which children trade off leisure and consumption, select their optimal bundle, and are rewarded by their parents accordingly.