Identity Economics and Intrahousehold Bargaining

Intrahousehold bargaining theory predicts that an income increase will cause an unambiguous increase in women’s bargaining power. Identity theory, in contrast, predicts that women may voluntarily give up power to compensate their husbands whose identity is challenged by the increase in their wives’ incomes. We outline a model of these competing forces. We then present empirical tests that use amendments to women’s inheritance laws in India to identify variations in female income. We exploit differences across long-standing and deep-rooted social institutions (caste groups and the practice of purdah or veiling) for variation in identity prescriptions. Using a large dataset on married women, we estimate significant identity effects that lead to the loss of bargaining power of women after their income increase. The negative identity effects vary predictably with a household’s stringency of patriarchal prescriptions regarding the “role” of women in a household. Consistent with identity theory, our results suggest that alterations in women’s labor market activities are a plausible mechanism through which the loss of women’s power is mediated and rule out alternative mechanisms, such as the potential rise in domestic violence that some scholars associate with increases in women’s income.