Spousal Control and Intra-Household Decision Making: An Experimental Study in the Philippines

Savings decisions are observed at the household level, but little is understood about how such decisions are jointly made by the members of the household. This paper employs a new experimental design to examine two poorly understood factors in household spending and savings decisions: private information and communication between spouses. Married couples in the Philippines were given approximately a day’s wage and asked to make financial decisions under three randomly assigned treatment conditions: private information-no communication (“private”); full information-no communication (“public”); and full information-full communication (“negotiation”). I find that men’s decisions are highly responsive to changes in these conditions, whereas women’s decisions remain stable. In private, the majority of men choose to save in their own accounts. In public, when their wives find out about their decision but can not affect it beforehand by communicating, men choose to consume their income. In negotiation, after communication with their spouse, the majority of men decide to save their income in their wives’ account. The strong effect of information and communication on men can be understood through a monitoring framework, whereby wives are entrusted with enforcing a contract that requires husbands to turn over their income. Wives’ monitoring is improved through both observability of income and communication at the moment of decision making. These results suggest that current household models are incomplete and that policy makers should put more weight on the conditions under which income allocation decisions are made. JEL Codes: D190, J120, 0150, C900, C790