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Pooling and Sharing Income within Households: A Satisfaction Approach

Author

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  • Susanne Elsas

Abstract

Standard household economics assumes that couples pool their incomes and share the sum equally, which is a necessary prerequisite for computing equivalent incomes and hence all statements about the distribution of personal incomes and income poverty. However, since cohabitation without marriage is on the rise and since income pooling is less frequent among cohabiting couples, income is also pooled and shared less frequently. In conclusion, statements based on these two assumption are becoming increasingly invalid. Using data from the German Socio-Economic Panel Study, I analyze the incidence and determinants of income pooling and then proceed to determine whether couples who pool their incomes share the sum equally. In contrast to most existing studies, I use a holistic approach to identify sharing within households by analyzing data on financial satisfaction. Concerning the relation between income sharing and income pooling, I account not only for the dominance of pooling over sharing, but also for the possibility of correlated error terms of the pooling and the sharing equation. A further advancement of this paper is the use of panel data, which enables me to account for unobserved heterogeneity at the household level. The results indicate that the hypothesis of equal sharing even has to be rejected for couples who pool their incomes, which implies that a wide range of analyses of income poverty, for instance, may be misleading.

Suggested Citation

  • Susanne Elsas, 2013. "Pooling and Sharing Income within Households: A Satisfaction Approach," SOEPpapers on Multidisciplinary Panel Data Research 587, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp587
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    References listed on IDEAS

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    Cited by:

    1. Katrin Huber & Erwin Winkler, 2016. "All We Need is Love? Trade-Adjustment, Inequality, and the Role of the Partner," SOEPpapers on Multidisciplinary Panel Data Research 873, DIW Berlin, The German Socio-Economic Panel (SOEP).

    More about this item

    Keywords

    Income pooling; intra-household allocation; subjective well-being; two-part model;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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