Intrahousehold Bargaining Power and Leisure Externalities using the PSID 1968-2011

Using a collective model of labor supply and the methodology of Vermeulen et al. (2006), I estimate intrahousehold bargaining power and leisure externalities from observed labor supply decisions and income in the Panel Study of Income Dynamics. This analysis provides several contributions to the collective model literature. First, I consider a large time period (1968-2011) – a scale rarely approached in this literature. Subsequently, I use this estimation to look at how intrahousehold bargaining power and leisure externalities have changed over time. I find an increasing and concave time profile to male intrahousehold bargaining power, which can be mapped to dramatic changes in the female labor market in the last 40 years. I also find that women’s preference for shared leisure is higher than but converging on men’s, with both preferences exhibiting decreasing and convex profiles over this same time period. Estimates of preferences over a leisure interaction are large in magnitude relative to preferences over private leisure, suggesting that models considering only private leisure are not sufficiently rich to capture the interdependence of labor choices in the household. Heterogeneity across households in intrahousehold bargaining power and preferences over shared leisure is also considered.1 I would like to thank my advisor Pierre-André Chiappori for the countless hours of discussion. I am grateful for his help in making accessible such an important literature on intrahousehold allocations and labor supply. I would also like to thank Lena Edlund for her insights on various drafts, and my thesis class for sitting through presentations of varying quality as my thesis took shape. Finally, many thanks to Frederic Vermeulen for taking the time to discuss his 2006 paper – a work whose methodology forms the backbone of my thesis.