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Dynamic bargaining in households (with application to Bangladesh)

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  • Ligon, Ethan

Abstract

Much recent empirical work on intra-household allocation uses the axiomatic Nash Bargaining model to make predictions about how the distribution of consumption within the household will respond to individuals' income shocks. However, one of the basic axioms underlying this approach is that allocations will be Pareto optimal, so forward-looking, risk adverse household members ought to be expected to smooth away any such response to income shocks-Pareto optimality seems to be too strong in a dynamic setting. In this paper we use explicitly dynamic framework and replace the axiom of Pareto optimality with a weaker notion of efficiency. We give a simple algorithm for computing allocations, and construct an extended example, meant to model the effects of Grameen Bank lending on intra-household allocation in Bangladesh. The model resolves a puzzle in the literature, namely, it predicts that women borrowers will often voluntarily surrender control ("pipeline") their loans to their husbands.

Suggested Citation

  • Ligon, Ethan, 2002. "Dynamic bargaining in households (with application to Bangladesh)," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1t52k4c5, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt1t52k4c5
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    Citations

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    Cited by:

    1. Ngo, Thi Minh-Phuong & Wahhaj, Zaki, 2012. "Microfinance and gender empowerment," Journal of Development Economics, Elsevier, vol. 99(1), pages 1-12.
    2. Del Boca, Daniela & Flinn, Christopher, 2012. "Endogenous household interaction," Journal of Econometrics, Elsevier, vol. 166(1), pages 49-65.
    3. Chen, Natalie & Conconi, Paola & Perroni, Carlo, 2007. "Women’s Earning Power and the “Double Burden” of Market and Household Work," The Warwick Economics Research Paper Series (TWERPS) 800, University of Warwick, Department of Economics.
    4. Kazianga, Harounan & Wahhaj, Zaki, 2017. "Intra-household resource allocation and familial ties," Journal of Development Economics, Elsevier, vol. 127(C), pages 109-132.
    5. Gustavo J. Bobonis & Melissa González-Brenes & Roberto Castro, 2013. "Public Transfers and Domestic Violence: The Roles of Private Information and Spousal Control," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 179-205, February.
    6. Wolff, Francois-Charles, 2006. "Microeconomic models of family transfers," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    7. Steve Laufer & Ahu Gemici, 2009. "Marriage and Cohabitation," 2009 Meeting Papers 1191, Society for Economic Dynamics.
    8. Robert A. Pollak, 2017. "How Bargaining in Marriage drives Marriage Market Equilibrium," NBER Working Papers 24000, National Bureau of Economic Research, Inc.
    9. Chen, Natalie & Conconi, Paola & Perroni, Carlo, 2006. "Does Migration Empower Married Women?," CEPR Discussion Papers 5559, C.E.P.R. Discussion Papers.
    10. Leora Friedberg & Steven Stern, 2014. "Marriage, Divorce, And Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1155-1199, November.
    11. Hoel, Jessica B., 2015. "Heterogeneous households: A within-subject test of asymmetric information between spouses in Kenya," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 123-135.
    12. Robert A. Pollak, 2018. "How Bargaining in Marriage Drives Marriage Market Equilibrium," Working Papers 2018-004, Human Capital and Economic Opportunity Working Group.
    13. Vegard Iversen et al, 2009. "Does one size fit all? An experimental test of household models in East Uganda," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 09-04, Indian Statistical Institute, New Delhi, India.
    14. Luke, Nancy & Munshi, Kaivan, 2011. "Women as agents of change: Female income and mobility in India," Journal of Development Economics, Elsevier, vol. 94(1), pages 1-17, January.

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