The Causal Effect of Female Labour Participation on Household Consumption. Evidence from Spanish Data

When a household decides whether the woman participates or not in the labour market, we ask two questions: (i) Is the loss in female leisure made up for a change in consumption?, and (ii) Is this change considered when the household makes the decision? In order to answer such questions, we propose a collective model that takes into account the joint decision on consumption of several commodities and female leisure. As commodity demands switch at the corner solution of female nonparticipation, we measure the causal effect of female participation on the consumption of commodities through treatment parameters commonly used in the program evaluation literature. These treatment parameters can be interpreted as the effect of changing the ration of the rationed good (female leisure) on the consumption of freely chosen commodities. The collective analysis parallel to the traditional analysis of rationing needs to incorporate an effect of wages that operates through the man’s and the woman’s bargaining powers. Our results show that female labour participation causes a benefit in the consumption of several commodities based on observable household characteristics. Female labour participation also causes changes in consumption that are unobservable for us but are observed and considered by the household when it decides whether the woman participates. JEL codes: D11, D12, C34, J22