Efficiency Wages for Rotten Kids: Intrahousehold Consumption and Nutrition in the Philippines

Using data on individual consumption expenditures from a sample of farm households in the Philippines, we construct a direct test of the unitary household model. We are able to contrast the efficient outcomes predicted by the unitary household model with the constrained efficient outcomes we might expect if there was a hidden action problem within the household; in the latter case, household members are allocated a sort of efficiency wage (à la Shapiro and Stiglitz, 1984), which depends on their (stochastic) productivity. Finally, we are able to contrast each of these environments with one in which food consumption delivers not only utils, but also nutrients which affect future productivity (a different sort of “efficiency wage”, à la Stiglitz, 1976). Moment restrictions implied by each of these three different sets of arrangements are nested, and so we are able to distinguish among these three different hypotheses regarding intra-household allocation.