Preference Driven Intra-household Conflict and Commitment Savings Strategies

I analyze whether intra-household conflict induces females to use commitment savings strategies. A model of participation in Rotating Savings and Credit Associations, an informal commitment savings strategy, predicts females with mid-bargaining power levels will participate to protect their savings from partner’s claims. In the model, preference heterogeneity for an indivisible good drives conflict and the couple’s decision making is efficient by following the collective framework. I use the 2005 and 2009 waves of a nationally representative panel survey from Mexico to test the model. I exploit the difference-indifference effect the 2007 Great Recession had on couples in which females but not males worked in manufactures prior the shock. It instruments a labor-earnings based female bargaining power measure. I find in instrumented first-differences estimations that, compared to other females in couple, females with mid-bargaining power levels are more likely to participate. Results are robust to accounting for couple’s heterogeneity in discount factors as additional conflict source. But when females are either more or less patient than their partner, female participation doubles. Results are robust to whether female’s partners participate. But when they do, female participation increases fourfold. Results hold for old couples, those that had been together longer, but not for young couples; suggesting old but not young couples reach efficient allocations.