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This 3 page Class Notes was uploaded by Ilene Heathcote on Wednesday October 21, 2015. The Class Notes belongs to ECN 500 at Syracuse University taught by Susan Gensemer in Fall. Since its upload, it has received 31 views. For similar materials see /class/225644/ecn-500-syracuse-university in Economcs at Syracuse University.
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Date Created: 10/21/15
ECN 500WSP 500 HANDOUT FALL 2007 Who Gets What in the Household Becker s Altruist Model We present a simpli ed version of Becker s model which illustrates its basic features a The husband s utility is assumed to depend on his own consumption Oh and his wife s consumption Cw It is assumed that as his or his wife s consumption increases his utility increases Because of the latter effect he is said to be an altruist He is assumed to have the usual preferences over his own and his wife s consumption levels Cwcunsumpuun arms U2 c h Eunsumpuun ur husband a The wife is assumed to be sel sh ie her utility depends positively on her consumption only not on her husband s consumption Let h be the husband s income and w be the wife s income Let the price of consumption be 1 The household budget constraint is ChCw hlw Choices of consumption levels for husband and wife are made by the husband given the household budget constraint and subject to the condition that his wife not end up with a lesser consumption level than what her income would allow her Therefore in the following diagram if the husband s income is 9 and the wife s income is l the optimal point is where both the husband and wife have consumption levels of 5 In this case since the husband consumes less than his income level would allow he is said to be an e ective altruist But if the husband s income is l and the wife s income is 9 the optimal point is where the husband and wife consume amounts equal to their income levels CW consumption of wife 1 budget constraint Ch consumption of husband References Becker Treatise on the Family on reserve Intrahousehold Bargaining Model and Its Features LL Utility of tility possibilities curve Wife UW10 Alienation point U 10 Utilityof h Lil husband a Utility possibilities curve 7 This represents the tradeoff between husband s and wife s utilities as one s utility increases the other s decreases Alienation or threat point 7 Uh utility of husband living alone 0 utility of wife living alone these can depend on a number of things eg wages As husband s wage increases his alienation level of utility exit option increases as wife s wage increases her alienation level of utility exit option increases Outcome is based on a bargaining process it is assumed to occur along the utility possibilities curve and it depends on the alienation point If there is a shift of the utility possibilities curve or the alienation point then the outcome may well change 7 The utility of each at the outcome is at least as large as at hisher alienation level 7 If the utility possibilities curve is symmetric and alienation levels are the same then outcomes are equa 7 If the utility possibilities curve is symmetric and alienation levels are not the same the outcome is larger for the individual with the larger alienation level Example of Analyzing a Change in this Framework Assume that the husband s alienation level of utility decreases and that the utility possibilities curve shifts inward in a symmetric way We have represented two of the three possible changes in the following U Utility 0 W Wife New out e C or D D A2727 Old outcome B2 0 W alienation Old utility possibilities cmve 1 int UW10 Old alienation Ne utihty possllnhties curve point Uh 10 Uh Utility of husband References Marilyn Manser and Murray Brown Marriage and Household DecisioneMaking A Bargaining Analysis International Economic Review Vol 21 No 1 Feb 1980 31744 Marjorie B McElroy and Mary Jean Horney NasheBargained Household Decisions Toward a Genere alization of the Theory of Demand International Economic Review Vol 22 No 2 Jun 1981 333749 Shelly Lundberg and Robert A Pollak Separate Spheres Bargaining and the Marriage Market Journal of Political Economy Vol 101 No 6 Dec 1993 98871010
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