Caring and Sharing: Tests Between Alternative Models of Intra-Household Allocation

Several models of intra-household decision making have been suggested in the literature. One important dichotomy is between non-cooperative and cooperative models (including speci...c models of bargaining). The other important distinction is between models that allow for caring and those that do not. We present a framework that includes all suggested models and variants as special cases. We derive the theoretical predictions of these models for the relationship between expenditures on goods and the intra-household distribution of income. We estimate and test between these relationships using Canadian household expenditure data. We conclude that there is evidence that both husbands and wives care for each other in the sense that with an unequal distribution of incomes the high income partner behaves as a ‘Becker dictator’ and there is local income pooling. We further ...nd that for about half of the households in our sample (those with more equal incomes) a re-distribution of income would lead to changes in budget allocations. We conclude that the data are consistent with a collective model with caring partners. ¤We gratefully acknowledge the contribution of Wasif Rasheed to the research presented in this paper. We are also grateful to Andrew Chesher, Philippe Jéhiel, Arthur Lewbel and participants at seminars at Inra, Ceras, Bristol, Nu¢eld, Copenhagen and at ESEM in Toulouse for comments and discussion. We thank the Canadian SSHRC and the Danish Social Science Research Foundation (SSF) for support.