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Determinants and Consequences of Bargaining Power in Households

  • Leora Friedberg
  • Anthony Webb

    ()

    (Center for Retirement Research, Boston College)

A growing literature offers indirect evidence that the distribution of bargaining power within a household influences decisions made by the household. These results undermine the notion that a household can be treated as a "unitary" decision maker. The indirect evidence links household outcomes to variables that are assumed to influence the distribution of bargaining power within the household. In this paper, we have data on whether a husband or wife in the Health and Retirement Study "has the final say" when making major decisions in a household. We use this variable to analyze determinants and some consequences of bargaining power. Our analysis overcomes endogeneity problems arising in many earlier studies and constitutes the missing link confirming the importance of household bargaining models. We find that decision-making power depends on plausible variables within the household and also influences important household outcomes, and moreover that the second set of results is much stronger than the first set. While current and lifetime earnings significantly affect decision-making power, the effects are moderate. On the other hand, decision-making power has important effects on financial decisions like stock market investment and total wealth accumulation and may help explain, for example, the relatively high poverty rate among widows. Thus, our results suggest that more research into the determination of bargaining power is needed, and that household bargaining has major effects on the welfare of household members.

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File URL: http://crr.bc.edu/working-papers/determinants-and-consequences-of-bargaining-power-in-households/
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Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2006-13.

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Length: 36 pages
Date of creation: Jun 2006
Date of revision: Jun 2006
Handle: RePEc:crr:crrwps:wp2006-13
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  17. Steven Stern & Michael J. Brien & Lee A. Lillard, 1999. "Cohabitation, Marriage, and Divorce in a Model of Match Quality," Virginia Economics Online Papers 322, University of Virginia, Department of Economics.
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