Abstract
In this paper we consider the issue of the intra-household distribution of welfare directly using a survey measure of self-perceived economic well-being. We develop a theoretical model of satisfaction within the household for couples. In the empirical analysis we find that husbands and wives often report different levels of financial satisfaction. The most important correlate of relative satisfaction within the household is found to be relative income. This is a direct confirmation of the previously implicit findings and is predicted by our theoretical model.
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Notes
The satisfaction measure chosen here is assumed to be a valid proxy for economic well-being. This is legitimised by Schyns (2001), who shows that a bottom-up phenomenon saying that domains satisfactions constitute the overall satisfaction is present.
In an earlier version of this paper we presented an analysis of singles which motivates this assumption.
Here we are implicitly assuming that preferences are egoistic and/that the two partners do not care for each other. All of the results developed here go through with a caring assumption so long as each person cares more for themselves than they do for their partner. This is a standard assumption in the intra-household literature.
We could replace this with an assumption about saving behavior at the cost of extra notation and no gain in empirical applicability.
We should strictly take an increasing function of the utility function but this is irrelevant since we only observe a categorical response.
Note that in this discussion the stronger effect of the share at the top end of the share values (due to convexity) is offset by the fact that the ninth percentile is closer to the median than is the first percentile.
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Acknowledgement
Browning thanks the Danish National Research Foundation for support through its grant to the Centre for Applied Microeconometrics (CAM). We thank two editors and two referees and participants at the Paradoxes of Happiness within Economics conference, Milan, March 2003, for comments.
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Data appendix
Data appendix
We begin with 1,032 households comprising two adults with no children. We drop 84 observations that have unusable satisfaction responses; two households with unusable education information, and three households with low net household income (less than 50,000 DKK). This leaves us with 943 households.
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Bonke, J., Browning, M. The distribution of financial well-being and income within the household. Rev Econ Household 7, 31–42 (2009). https://doi.org/10.1007/s11150-008-9044-3
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DOI: https://doi.org/10.1007/s11150-008-9044-3