Childbirth and Welfare Inequality: The Role of Bargaining Power and Intrahousehold Allocation

This paper investigates the impact of childbirth on wives’ bargaining power and welfare by analyzing labor market responses and adjustments in intrahousehold resource allocation. Using data from the Japanese Panel Survey of Consumers (1993–2020) and employing an event study approach, we find that wives, relative to their husbands, experience a 38.59% decrease in private consumption and a 13.82% decrease in leisure right after the birth of the first child. We develop a collective bargaining framework to estimate the effects of parenthood on bargaining power, preferences for consumption and leisure, and productivity in producing public goods for both spouses. Our analysis reveals that the wife’s bargaining power declines by an average of 34.3% within the first eight years after the first birth, while her preference for public goods increases more than her husband’s. Additionally, the arrival of a child leads to a 12.2% decline in welfare for wives but a 7.0% increase for husbands. Counterfactual analysis suggests that if wives’ bargaining power had remained unchanged after childbirth, their welfare would have increased by 21% compared to the baseline, and their welfare relative to their husbands’ would rise from 75% to 82%.