How much of consumption inequality across households is due to preference heterogeneity and how much due to wage and wealth inequality? This paper studies the link from wage to consumption inequality within a lifecycle model of consumption and family labor supply. Its distinctive feature is that households have general heterogeneous preferences over consumption and labor supply. The paper shows identification of the joint distribution of unobserved household preferences separately from the observed distributions of incomes and outcomes. Estimation on data from the Panel Study of Income Dynamics in the US reveals substantial heterogeneity in consumption preferences. Such heterogeneity accounts for approximately 52% of consumption inequality in recent years.
This paper examines changes in married people's allocation of time since 1980, a period in which female labor supply increased substantially, men's share of household work rose, and the gender wage gap narrowed down. I develop a life-cycle collective household model for market and non-market work, consumption and asset accumulation, which also features lack of commitment to lifetime marriage. Wages in the model shift intra-family bargaining power and induce bargaining effects on outcomes in addition to standard income and substitution effects. I estimate gender-specific preferences and how intra-family bargaining power changes with a narrowing gender gap using data from the PSID. The results suggest that a narrowing gender gap improved women's bargaining power in the family resulting in a shift of household work to their husbands. It also contributed to the increase in female labor market partici-pation. If the gender gap is counterfactually eliminated, the proportion of women in full-time work rises throughout the lifecycle to match approximately that of men. The increase comes from women who cut down household chores and enter the labor market when they previously did not participate.
This paper studies how individual and total consumption in the family respond to idiosyncratic wage changes using a collective life-cycle model for a family of two decision-making spouses. The model incorporates endogenous family labor supply, public and private consumption, asset accumulation, correlated wage shocks, and general nonseparable, spouse-specific preferences. Wages enter the household budget constraint, but also the spouses' intra-family bargaining powers implying lack of spousal commitment to future allocations. I derive analytical expressions for the dynamics of earnings and consumption; I show how those can be used to identify the household structure (spouse-specific preferences, allocation of consumption between spouses, a rich set of bargaining effects) with panel data on hours, earnings, assets, and household-level consumption only. The identifying assumption is that spouses have the same preferences with their single counterparts. Preliminary evidence from the PSID suggests strong labor and consumption response to wage shocks and that hours and consumption are substitute goods at the intensive margin of labor supply. Wages have an economically significant effect on intra-family bargaining power, but not statistically so.
Selected Work in Progress
5. Intertemporal Commitment in Households