Latest Working Paper
The extent to which individuals commit to their partner for life has important implications. This paper develops a lifecycle collective model of the household, through which it characterizes behavior in three prominent alternative types of commitment: full, limited, and no commitment. We propose a test that distinguishes between all three types based on how contemporaneous and historical news affect household behavior. Our test permits heterogeneity in the degree of commitment across households. Using recent data from the Panel Study of Income Dynamics, we reject full and no commitment, while we find strong evidence for limited commitment.
Spending time together with a spouse is a major gain from marriage. We extend the classical collective model of the household to allow for togetherness between spouses. Togetherness takes the form of joint leisure and joint care for children. Using revealed preferences conditions and Dutch data over years 2009-12, we find that households are willing to pay €1.2 per hour -10% of the average wage- to convert private leisure to joint, and €2.1 per hour to convert private childcare to joint. Our results suggest togetherness is an important component of household time use despite being overlooked in the economics literature.
2. Consumption Inequality across Heterogeneous Families - European Economic Review, 136, 2021
What does preference heterogeneity imply for consumption 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 unexplained heterogeneity in consumption preferences but little unexplained heterogeneity in labor supply preferences. Preference heterogeneity accounts for about a third of consumption inequality in recent years and implies, on average, lower partial insurance of wage shocks compared to recent studies in the literature.
Other Working Papers
1. Intrahousehold Commitment and Intertemporal Labor Supply (July 2020)
This paper studies household labor supply, within the context of an intertemporal collective model, and three prominent intrahousehold commitment regimes: full commitment, no commitment, and limited commitment. We propose a test that distinguishes among all three alternatives based on how contemporary and historical changes to the economic environment affect household behavior. We implement the test on recent data from the Panel Study of Income Dynamics in the US (1999-2017). Although couples and singles behave similarly in many aspects, couples’ labor supply exhibits distinctive features that are consistent with limited commitment. We then use our results to highlight several issues and caveats that arise when testing for commitment.
2. Wages and Family Time Allocation (February 2018)
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 participation. 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.
3. Consumption Dynamics and Allocation in the Family (September 2016)
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
1. Family Time Allocations over the Last Half Century
Over the last half century, married American women doubled their labor supply and halved the time they spend on household chores. By contrast, married American men reduced their labor supply and increased their involvement in chores. Both increased the time they devote to children but men, especially the most educated, did so by far more. What explains these dramatic changes in family time allocations? I develop a dynamic collective model that incorporates family time use and features financial and human capital, rich earnings dynamics, and endogenous divorce. The model quantifies the role of (i) the wage and education gender gaps; (ii) fertility and the cost to raise children; (iii) labor market experience; (iv) technical change in the household; and (v) features of the marriage market such as the expansion of divorce in the early 1970s. Preliminary results suggest that -at least- the gender wage gap and the divorce option are important for the observed time allocation dynamics. The latter implied an improvement in intra-household bargaining power among women born in the 1950s and a transfer of non-market work to their husbands.
2. Consumption Partial Insurance with Higher Moments
with Anisha Ghosh
4. Spatial Inequality in Lifetime Income
with Suphanit Piyapromdee
5. Spending Time and Money in the Household: A new Characterization of the Retirement-Consumption Puzzle
6. Unemployment Insurance in the Family
with Tom Potoms
1. Economic effects of Covid-19 in Luxembourg (April 2020)
with several researchers and policy makers in Luxembourg
In this working note, a group of economists based in Luxembourg join forces to assist the Task Force for the Coordination of the Public Research Sector in the Context of the Covid-19 Pandemic. We aim to provide knowledge on the economic issues related to the Covid-19 crisis. We provide a summary of ongoing research, proceed to back-of-the-envelope estimations of the direct economic impact of the health crisis and resulting policy measures, anticipate forces that may drive to a breakdown of the global economic system, discuss the policy options that are available to decision makers to mitigate the short-run costs and the risk of a systemic collapse, and provide suggestions for future research.