The Impact of Intra Household Balance of Power on Expenditure Pattern: the Australian Evidence*

The collective approach to household behaviour models the household utility function as the weighted average of the utilities of the individual members of the household. These weights, which measure the relative bargaining power of males and females within the household, are generally regarded as fixed and exogenous. The paper extends the collective approach and estimates a model where the weights are endogenously determined. The novelty of the analysis lies in the simultaneous equations estimation of the bargaining power and the budget share equation that allow for the endogeneity of the power variable in the examination of its impact on the budget share of the various items. The estimation is conducted using data from the 1998–99 Australian Household Expenditure Survey data set. The relative bargaining power of males and females have statistically significant effects on household expenditure patterns. The analysis reveals some interesting non-monotonic relationships between relative power and budget shares that vary a great deal between commodities.