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Household consumption when marriage is stable

Author

Listed:
  • Laurens Cherchye

    (Institute for Fiscal Studies and Katholieke Universiteit Leuven)

  • Thomas Demuynck

    (Institute for Fiscal Studies)

  • Bram De Rock

    (Institute for Fiscal Studies and Université libre de Bruxelles)

  • Frederic Vermeulen

    (Institute for Fiscal Studies and University of Leuven)

Abstract

We develop a novel framework to analyze the structural implications of the marriage market for household consumption. We define a revealed preference characterization of efficient household consumption when the marriage is stable. Stability means that the marriage matching is individually rational and has no blocking pairs. We characterize stable marriage with intrahousehold (consumption) transfers but without assuming transferable utility. We show that our revealed preference characterization generates testable conditions even with a single consumption observation per household and heterogeneous individual preferences across households. The characterization also allows for identifying the intrahousehold decision structure (including the sharing rule) under the same minimalistic assumptions. An application to Dutch household data demonstrates the usefulness of our theoretical results. We find that the female gets a higher income share when her relative wage increases, which we can give a structural interpretation in terms of outside options from marriage that vary with individual wages.

Suggested Citation

  • Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2014. "Household consumption when marriage is stable," IFS Working Papers W14/26, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:14/26
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    References listed on IDEAS

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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