Royal Economic Society

INEQUALITY IN CONSUMPTION BETWEEN HUSBANDS AND WIVES

New research published in the January 2007 issue of the Economic Journal finds powerful evidence of intra-household ‘discrimination’ in consumption. Examining a representative sample of French households, the study by Professor Olivier Donni finds that:

• If the non-labour income of a typical couple increases by 1,000 euros, on average, the wife’s consumption will increase by only 390 euros and the husband’s consumption by 610 euros. In other words, the husband will be the main benefactor of the increase in non-labour.
• Looking at how labour incomes are allocated between spouses, the intra-household inequality in consumption seems even more impressive. A 1,000 euros increase in the husband’s wage will increase the wife’s share of consumption by only 120 euros. In other words, only a very small fraction of the husband’s earnings falls to the wife.

These results have several strong implications for economic policy:

• First of all, if the government has the objective of reducing poverty at the individual level, the impact of its policy on the intra-household distribution of resources must be taken into account.
• Moreover, the fact that joint taxation of households decreases the earning capacity of women ( they bear a high taxation rate because their income is supplemented by their husband’s income) may reduce women’s bargaining power and, ultimately, cause inequality of consumption within the household.
• Finally, government aid to single women, who are particularly affected by poverty, can improve the situation of married women as well. The reason is that this form of aid makes divorce a more credible threat during marriage and improves a wife’s position in negotiation.

Until now, it has not been widely documented that the distribution of material goods within households may well be to the disadvantage of women. Economists tend more and more to believe that individual consumption within the household is determined by fierce negotiation between spouses. Relative negotiation power is, in turn, influenced by some variables such as the earning capacity of spouses. This hypothesis is confirmed by this empirical study.

The results are obtained without directly observing the individual consumption of spouses. Indeed, such information would be difficult to obtain: the interviewer would have to observe how the purchased goods are actually used in the household, which is virtually impossible.

In fact, to obtain the measure of inequality in consumption, the study examines the relationship between the goods purchased at the household level and women’s labour supply, on the one hand, and the various forms of incomes (non-labour income, wife’s labour income, husband’s labour income) on the other hand.

The researcher then constructs a theoretical model that makes it possible to infer variations in individual consumptions from the observation of household behaviour. The idea of the model is that the level of women’s labour supply may be an indicator of women’s welfare (or consumption) within the household.

ENDS

Notes for editors: ‘Collective Female Labour Supply: Theory and Application’ by Olivier Donni is published in the January 2007 issue of the Economic Journal.

Olivier Donni is an associate professor at the Université de Cergy-Pontoise in France (website: http://www.u-cergy.fr/rech/pages/donni).

For further information: contact Olivier Donni on +33-1-34256373 (email: olivier.donni@eco.u-cergy.fr); or Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com).