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Are households Pareto efficient? A test based on multiple job holding

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  • Penglase, Jacob
  • Sözbir, Ömer F.

Abstract

The collective household model requires that household decisions result in Pareto efficient outcomes. While this assumption is falsifiable, these tests are often difficult to implement due to data limitations or insufficient statistical power. We identify a novel setting—multiple job holding—where these issues are less of an obstacle. Using data from Bangladesh, we estimate the labor supply of households where members are engaged in multiple occupations and use the parameter estimates to test the collective model. We are unable to reject Pareto efficiency, but do find evidence against the unitary model. The results support the use of the collective model as a framework to study the inner workings of the household.

Suggested Citation

  • Penglase, Jacob & Sözbir, Ömer F., 2026. "Are households Pareto efficient? A test based on multiple job holding," Labour Economics, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:labeco:v:98:y:2026:i:c:s0927537125001654
    DOI: 10.1016/j.labeco.2025.102841
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    Cited by:

    1. Velilla, Jorge & Theloudis, Alexandros & Chiappori, Pierre-André & Gimenez-Nadal, J. Ignacio & Molina, Jose Alberto, 2026. "Commitment and the Dynamics of Household Labour Supply: New Tests and Evidence from Europe," Other publications TiSEM 558dc95d-cf29-405a-b3f2-9, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

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    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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