Journal Article

Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment

Maurizio Mazzocco

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 74, issue 3, pages 857-895
Published in print July 2007 | ISSN: 0034-6527
Published online July 2007 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2007.00447.x
Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment

More Like This

Show all results sharing these subjects:

  • Household Behaviour and Family Economics
  • Intertemporal Choice and Growth

GO

Show Summary Details

Preview

In this paper, a formal test of intra-household commitment is derived and performed. To that end, two models of household intertemporal behaviour are developed. In both models, household members are characterized by individual preferences. In the first formulation, household decisions are always on the ex ante Pareto frontier. In the second model, the assumption of intra-household commitment required by ex ante efficiency is relaxed. It is shown that the full-efficiency household Euler equations are nested in the no-commitment Euler equations. Using this result, the hypothesis that household members can commit to future allocations of resources is tested using the Consumer Expenditure Survey. I strongly reject this hypothesis. It is also shown that the standard unitary framework is a special case of the full-efficiency model. However, if household members are not able to commit, household intertemporal behaviour cannot be characterized using the standard life-cycle model. These findings have two main implications. First, policy makers can change household behaviour by modifying the decision power of individual household members. Second, to evaluate programmes designed to improve the welfare of household members, it would be beneficial to replace the standard unitary model with a characterization of household behaviour that allows for lack of commitment.

Keywords: D11; D12; D13; D91

Journal Article.  16598 words.  Illustrated.

Subjects: Household Behaviour and Family Economics ; Intertemporal Choice and Growth

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.