Household economics keynote sep 4 2015 edited sept 10

Shoshana Grossbard Sabe @Sibiu keynote address 1

HOUSEHOLD ECONOMICS: A FIELD

IN MOTIONKeynote address by Shoshana Grossbard

SABE/IAREP MeetingsSibiu, Romania, September 4 2015


• Introduction to economics courses typically start with the circular flow model of ECONOMIC ACTIVITY that captures some of the main economic transactions in the economy.


The circular flow of economic activity. Source: McConnell, Brue and Flynn, 2015


CIRCULAR FLOW OF THE ECONOMY• The bare-bones version of that model has households

on one side and firms on the other side; goods and services flow from the firms to the households while the latter pay the firms for what they consume. • Labor and capital flows from the households to the

firms who pay the households for their inputs into the production process. • The chart is often extended to include the role of government.


Households in the Circular Flow Chart• The chart focuses on ECONOMIC ACTIVITY typically defined as commercial

activity. It involves monetary transactions (the blue arrows). The chart reflects the focus of economics as a discipline. • The chart emphasizes the roles of households as

• CONSUMERS• SUPPLYERS OF LABOR / WORKERS• SUPPLYERS OF CAPITAL/ SAVERS

• The circular flow chart is symmetric: it gives businesses and households equal importance. However, even in this restricted sense of economics, most economics courses offer a more comprehensive treatment of business economics (focused on decisions by firms) than of household economics (focused on decisions by households).


In academia the study of matters of interest to firms tends to be more integrated than that of interest to households.• Many universities now have business schools employing numerous

economists and other scholars, providing opportunities for them to interact and learn from each other. • But there are no “household schools” hiring household economists.

Integration with other scholars studying households into one ‘school’ is thus less available to household specialists than it is to business specialists• Again, this indicates that the focus of academic economics lies on the

study of economic activity in the narrow sense of commercial activity with monetary dimensions (there are schools of public policy too, but their main focus is on the role of government).


In the 1960s• Some economists tried to expand the economic analysis of household

decisions beyond this focus on commercial transactions. • This led to an integration process of various applications of household

economics


The New Home Economics and Becker’s Economics of the Family.

• The New Home Economics (NHE) is a school of thought that developed when its founders—Gary Becker and Jacob Mincer—both taught at Columbia in the 1960s


A biographical note• Both Becker and Mincer were of Eastern European origin. Mincer was

born and raised in Lublin, Poland; Becker was born in Pennsylvania, US, but his parents were born in Eastern Europe (http://www.achievement.org/autodoc/printmember/bec0bio-1)


The New Home Economics at Columbia• By 1969 Becker moved to Chicago, the main reason why the NHE is often considered a part of the Chicago-Columbia school of economics.

• NHE analyzed household decisions outside the circular flow of economic activity, including • fertility (Becker 1960, Mincer 1963), • women’s labor supply (Mincer 1962, 1963; Becker 1965), and • consumption and commuting time (Mincer 1963, Becker 1965).

Underlying the integration of these analyses was a model of the household as a small non-profit firm allocating its time and other resources. This firm engages in ‘household production’. Their student Michael Grossman (1972) became one of the founders of health economics. Their student Barry Chiswick became a founder of the economics of immigration. He is the only student who co-authored with both Becker and Mincer. Too bad he could not be here today and talk about this recent work, including work on the economics of language


References mentioned on previous slide• Becker, Gary S. (1965). “A Theory of the Allocation of Time.” Economic Journal 75(299):

493-517; Grossman, Michael. (1972). The demand for health: a theoretical and empirical investigation. New York: Columbia University Press; Mincer, Jacob (1962), "Labor Force Participation of Married Women: a Study of Labor Supply." In Aspects of Labor Economics edited by H. Gregg Lewis. Princeton, N.J.: Princeton University Press; Mincer, Jacob (1963), "Market Prices, Opportunity Costs, and Income Effects." In Measurement in Economics edited by C. Christ. Stanford, CA: Stanford University Press.

• Also see Grossbard, Shoshana. (2006). "The New Home Economics at Columbia and Chicago" chapter in Jacob Mincer, A Pioneer of Modern Labor Economics, Edited by S. Grossbard. New York: Springer, 2006.

https://www.researchgate.net/publication/226865282_The_New_Home_Economics_at_Columbia_and_Chicago


The New Home Economics at Chicago• After moving to Chicago Becker published rational decision-making models of marriage

(Becker 1973, 1974a), social interactions (Becker 1974b), and intergenerational transfers (Becker 1981).

• In addition to rational choice analysis, in some of these articles Becker also used market analysis and the concept of equilibrium (see Becker 1976).

• Much of his NHE-related work was incorporated into Becker’s (1981) Treatise on the Family.

Refs: Becker, Gary S. (1973). “A Theory of Marriage: Part I.” Journal of Political Economy 81(4): 813-846._____. (1974a), "A Theory of Marriage: Part II." Journal of Political Economy 82:511-26. _____. (1974b), "A Theory of Social Interactions." Journal of Political Economy 70:1-13._____. (1976). The Economic Approach to Human Behavior. Chicago: University of Chicago Press._____. (1981), A Treatise on the Family. Cambridge: Harvard University Press (2d edition: 1991).


When awarding him the Nobel prize in 1992, the Royal Swedish Academy of Sciences highlighted Becker’s “models of behavior of the family (or household), including distribution of work and allocation of time in the family.”http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1992/press.html

http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1992/press.html

http://www.nobelprize.org/nobel_prizes/lists/year/index.html?year=2014&images=yes


Household Economics = Becker’s economics of the family?• Household economics is often associated with what Becker included in

economics of the family, and with his focus on economic models of household formation and of intra-household and inter-generational allocation and distribution. • Many economists expect studies on household economics to contain a decision-

making model including at least some of the assumptions that Becker made. • Is this perhaps why, as editor of the Review of Economics of the Household, I

have received a number of referee reports mentioning that a paper is probably not a good fit for this journal even though I sent them the paper thinking that its topic fits us very well. Did they expect a theoretical model with some of the assumptions that Becker used?


Towards a More Integrated Household Economics (HE)

• I define HE as the “economic analysis” of decisions made by households, regardless of whether it contains formal theory. • HE includes • the study of household formation, which includes

• fertility (adding newborn children), • the nest-leaving of older children forming their own household, • marriage, divorce and • other forms of couple formation and dissolution.

• analyses of intra-household allocation, which covers studies of time use and intra-household distribution of consumption.


“economic analysis” of households? What does that include?• The answer is just as vague and evolving as in the case of more traditional

applications of economics. It certainly does not mean exclusion of insights and methods from other disciplines analyzing human behavior, such as psychology, sociology, or anthropology.

I have called for interdisciplinary cooperation since 1978, when I published “Towards a Marriage between Economics and Anthropology …” that called the attention of Benny Gilad while he started to organize SABE in the early 1980s! (ref: Amyra Grossbard. "Towards a Marriage Between Economics and Anthropology and A General Theory of Marriage," Papers and Proceedings, American Economic Review, 68(2):33-37, 1978. )


Economics has allocated the study of selected household decisions to

separate sub-fieldsHousehold Decisions

• Labor supply• Consumption

• savings decisions• health and reproduction• Etc..

Subfield• Labor Economics• consumer economics, marketing,

and ag. Economics• macro-economics• Health economics


What household decisions are typically studied and taught in economics departments?• Economics departments don’t cover HE very well. Let us take the

example of my own department


Our course offerings tend to give more weight to the analysis of commercial firms’ decisions and the monetary economy than to the study of household decisions that often are of a non-commercial nature.

This is typical.



How much HE does my department cover?• Part of labor economics deals with labor supply decisions. This is briefly

covered in introductory courses, intermediate courses, and not even a big part of labor economics courses.• Decisions such as whether to form a couple, to marry, or have a child are

rarely covered in basic courses of introductory or intermediate economics. When I teach I offer a unique course on the economics of the family. Very few economics departments do.• The economics bias towards commercial firms is also noticeable at the

level of the sub-fields of economics that are offered by doctoral programs training the economics professors of the future.




Some sub-fields of economics are not covered at all by many economics departments• This is especially true for relatively new applications of HE such as


Economics of Marriage


the economics of religion

https://www.google.com/search?q=images+of+religion+symbols&site=webhp&tbm=isch&imgil=jJyBQEsUinDNuM:;PVueeCZsp-YjqM;http://www.religious-symbols.net/&source=iu&pf=m&fir=jJyBQEsUinDNuM:,PVueeCZsp-YjqM,_&usg=__zviVMiDwMl8L7z11w5OEnG1JMSY%3D

https://www.google.com/search?q=images+of+religion+symbols&site=webhp&tbm=isch&imgil=jJyBQEsUinDNuM:;PVueeCZsp-YjqM;http://www.religious-symbols.net/&source=iu&pf=m&fir=jJyBQEsUinDNuM:,PVueeCZsp-YjqM,_&usg=__zviVMiDwMl8L7z11w5OEnG1JMSY%3D


the economics of ‘risky behaviors’ (e.g. smoking and other addictions, and unprotected sex),


economics of happiness, or studies of time uses other than labor supply.


Why such a broad definition of household economics?All applied economics has become more data-oriented in recent years, in part the result of the availability of new data and improved computation capacity and statistical methods.

• Experimental economics, defined as economic analysis based on controlled experiments, has become more prevalent (see Vernon Smith 1998)

• and more natural experiments are being identified and analyzed.

Furthermore, the broad definition of HE proposed here is a response to some of the criticisms of the assumptions behind the rational models that have traditionally dominated economics (see Shoshana Grossbard-Shechtman and Christopher Clague, On the Expansion of Economics. Armonk, N.J.: M.E. Sharpe. 2001; Frantz, Roger (2016), editor. Handbook of Behavioral Economics. London: Routledge, forthcoming).


More integration of the HE sub-fields is needed. Why?a/ Many of the same variables are studied by different sub-fields of HE. Some may be explanatory variables in one sub-field and outcome variables in another. Research in another sub-field could possibly lead to a better understanding of the mechanisms behind observed correlations. b/ Some new variables that were introduced as explanatory factors in one sub-field may also throw light in another subfield, or it may become the focus of further studies. c/ Some of the same empirical methods, such as natural experiment analysis and Instrumental Variable analysis, can be applied to various sub-fields. d/ Some of the same household decision-making models may apply to different sub-fields


Reasons why integration of HE sub-fields can be useful


Same variables in different sub-fields.Example 1 from health economics and economics of childcare. • Health economics includes analyses of elder care by grown adults, usually the

elderly’s children. • How much adult children take care of their elderly parents could be a function of how

much grandparents are taking care of grandchildren, or have done so in the past. They may be paying their elderly parents back for what they did.

• Causality could also run in the other direction: the amount of time that grandparents devote to taking care of grandkids could be a function of how much they expect their adult children to take care of them when they need assistance at a later stage.

• Problem: Scholars who study elder care are typically not following the economic literature dealing with childcare, and those who study childcare often don’t study the economics of aging.


Example 2 of two fields studying same variables• A variable frequently analyzed in labor economics—hours of work—and obesity, an outcome

belonging to the domain of health economics. • Causality in the connection between these variables could run both ways:

• people working longer hours may lose or gain weight as a result of their type of work but • it is also possible that weight, especially obesity, affects the ability to work. Also, Cawley

(2004) has shown that overweight women earn less in the labor force and this may discourage them from working.

• To the extent that obesity also affects the probability that an individual obtains transfers from their spouse and the potential size of such transfers, there may be income effects varying with weight that could explain some of the variation in hours of work (Grossbard 2015, Chapter 5).

Refs: Cawley, John (2004). “The impact of obesity on wages”. Journal of Human Resources, 39(2), 451-474; Shoshana Grossbard The Marriage Motive: A Price Theory of Marriage. How Marriage Markets Affect Employment, Consumption and Savings. Springer, 2015.


Example of “New” variable: Religion• An economist specializing in the study of savings (usually considered part of macro-

economics) discovered that religious differences partially explain savings (see Horioka 2014). • Another economist studying educational outcomes found that Muslim immigrants to the

U.S.A. have less education compared to immigrants not affiliated with any religion (Mukhopadhyay REHo 2011).

• Religion has also be found to be related to substance use initiation in adolescence (Kim-Spoon et al. 2015) and divorce rates (Lehrer and Chiswick 1993)

• Does this imply that specialists in other areas of HE, let us say labor economists, need to pay more attention to religion in their own studies? Data from countries including religion in standard government surveys of the labor force may then become more valuable relative to data from countries where such data collection is illegal, as is the case in the U.S.A.

• Refs: Horioka, Charles Y. (2014). “Are Americans and Indians more altruistic than the Japanese and Chinese? Evidence from an international survey of bequest plans.” Review of Economics of the Household 12(3): 411-438; Mukhopadhyay, Sankar. (2011). “Religion, Religiosity and Educational Attainment of Immigrants to the USA”. Review of Economics of the Household 9(4): 539-553; Kim Spoon, J., McCullough, M. E., Bickel, W. K., Farley, J. P., ‐& Longo, G. S. (2015). Longitudinal associations among religiousness, delay discounting, and substance use initiation in early adolescence. Journal of Research on Adolescence, 25(1), 36-43.; Lehrer, Evelyn L and Carmel U. Chiswick (1993). “Religion as a Determinant of Marital Stability.” Demography 30(3):385-404.


Two more example of new variables• Another example comes from a recent paper in the field of economics of

happiness: Hills, Proto, and Sgroi (“Historical Analysis of National Subjective Wellbeing Using Millions of Digitized Books.” IZA DP No. 9195, July 2015) used digitized books, including books read more than a century ago, to obtain long time series of happiness in different countries. This variable could be used in research in different sub-fields of HE. • A third example is that the full cost of a decision also needs to take account of

the cognitive processing cost. This opens the door to a new literature in neuro-economics that has a wide range of potential applications to HE (see Alonso, R., I. Brocas and J. Carillo (2014). "Resource Allocation in the Brain " Rev Econ Stud 81(2): 501-534; Kool, W. and M. Botvinick (2014). "A Labor/Leisure Tradeoff in Cognitive Control " J Exp Psych 143(1): 131-141.)


Empirical methods• All sub-fields of HE have to deal with the fact that most household

decisions are interrelated. • What I consume is related to what I save, to what I earn, to what I give, to

how many kids I have and to how old they are. • How much I earn depends on how much I studied and on how many kids I

have and whether I married or not. • How healthy I am depends on how happy I am, how much I work, number of

children, education, my spouse’s education….

• The list of interrelated household outcomes is endless. As a result, it is difficult to find exogeneous variables when estimating HE models.


Two methods that address this problem: 1/ natural experiment analysis Reading about the use of a natural experiment in one sub-field may inspire researchers of another household outcome to use the same experiment in their research. For example, Wang and Wang (REHo) found that the 9/11 tragedy on the likelihood that immigrants married natives or other immigrants. It appears that after 9/11 deteriorated labor market conditions and tighter immigration policies led to more immigrant/native marriages. This natural experiment has already been used in labor market studies (e.g. by Orrenius and Zavodny 2009), but it has more potential applications.

Refs: Wang, Chunbei and Le Wang. (2012) “The effects of 9/11 on intermarriage between natives and immigrants to the U.S.” Review of Economics of the Household 10(2): 171-192; Orrenius, Pia M. and Madeline Zavodny. (2009). “The effects of tougher enforcement on the job prospects of recent Latin American immigrants.” Journal of Policy Analysis and Management 28:239-257.


2/ Instrumental Variable analysis An instrument that worked when studying one outcome of household decisions may also be useful in another application of HE that is investigated within another sub-discipline of economics. For example, after sibling’s weight was introduced as an instrument in order to remove some of the endogeneity of own weight it became widely used in a variety of studies


Theoretical models.• Why theoretical models are still valuable. • First, at a minimum, they help provide causal mechanisms explaining findings.

• Second, they help identify relevant variables that were not previously connected to the outcome being studied or they help identify the structure that ties the outcome with other variables.

Example: The NHE had a considerable impact on HE in part thanks to the value added of the concept of household production introduced by Mincer (1963) and Becker (1965). (references on previous slide)


How to accomplish the integration of various subfields within HE?• Traditionally economics departments served as facilitators of

integration between various subdisciplines in economics• Another way to facilitate integration


REHo, the Review of Economics of the Household

• I founded this journal because of the importance of such integration. First issue came out in 2003• I believe that this is why the following great economists supported the project by

agreeing to serve on the editorial board (without being asked to write referee reports…):• The late Gary Becker, Nobel prize• The late Clive Granger, Nobel prize• The late Jacob Mincer, IZA prize• The late Jack Hirshleifer• Edward Lazear, IZA prize• Jim Heckman, Nobel prize (but he dropped out after a while, before we ever published

an issue…)


More on theoretical models that can be useful in HE


The concept of “production function in the household” continues to be relevant today• The full cost of obtaining what is consumed includes both the monetary cost and

the time cost • Example 1: a meal needs to be produced before it is consumed (there is a time cost even

if it is consumed away from home, but even more in the case of food produced at home Household production functions continue to be useful, as shown for example in studies of consumption of food away from home, food at home and nutrition quality (e.g. Davis REHo 2014)

• Example 2: other health-promoting behaviors (Anderson and Grossman REHo 2009). Grossman is a co-editor of REHo.

• But it is not necessarily a “household production function”• A/ the agent making decisions regarding production could be a household or • B/ an individual member of the household (see Phelps 1972, Grossbard 2011). • References: next slide.


References to previous slideDavis, George C. (2014). Food at home production and consumption: Implications for nutrition quality and policy. Review of Economics of the Household, 12(3), 565-588; Anderson, Richard and Michael Grossman (2009). “Health and the Household” Review of Economics of the Household 7(3):219-226; Phelps, Charlotte D. (1972). “Is the Household Obsolete?” The American Economic Review Papers and Proceedings, 62(1/2):167-174; Grossbard, Shoshana. “Independent individual decision-makers in household models and the New Home Economics” in Household Economic Behaviors edited by J. Alberto Molina. New York: Springer, 2011;


How useful is Price theory to HE analysis?• First look: much of what is being produced by households is of a non-

monetary nature, which limits the role that monetary prices can play in guiding inter-household and intra-household allocation of resources and distribution of goods. • A key tool of traditional price theory, market analysis, relies on the

existence of monetary prices and has therefore not been widely integrated into conceptual models of household decision-making. • Second look: there is more room for applying exchange analysis and

market theories of price determination to HE than is commonly thought


Exchanges and Prices within Households


Inter-Household and Intra-Household Exchanges• Family members often care for each other, especially when young

children and older adults are concerned. Providing such care is costly, at a minimum in terms of time cost (also called opportunity cost). Consequently, caring can be viewed as work. It is part of what I call Work-In-Household, or WiHo (Grossbard 2015); Nancy Folbre (2012) calls it ‘care work’.• Work is often exchanged for money or access to goods inside

households• Inside Nuclear families defined by filiation or couple formation. • Inside Extended families that go beyond nuclear families

Refs: Grossbard, Shoshana (2015). The Marriage Motive. New York: Springer; Folbre, Nancy (2012). For love and Money. Care Provisions in the United States. New York: Russell Sage Foundation.


Exchanges inside Extended families• At least three sub-fields of household economics study transactions

within extended families: • specialists on savings study bequests and other downstream transfers from older

parents to adult offspring, • health economists do research on care-giving to the elderly and this includes

care-giving by adult offspring, and • specialists of childcare also do research on child care services provided by

grandparents.

• All researchers engaged in these sub-fields are interested in the degree of altruism (love) and self-interest motivating outcomes. If members of two adjacent generations are selfish, an ‘exchange motive’ can be identified.


Four types of intergenerational exchanges • a/ money-for-money exchanges. • b/ caring-for-caring exchanges: • c/ downstream money flow exchanged for care-giving. • d/ upstream money flow exchanged for care-giving.


More on these 4 types:• a/ money-for-money exchanges. For example, Kotlikoff and Spivak (1981) hypothesize

that there could be an “implicit intra-family annuity contract” wherein parents receive an annuity from their children until their death in exchange for giving their children an ex post premium in the form of a bequest. Ref: Kotlikoff, Laurence J. and Avia Spivak. "The Family as an Incomplete Annuties Market." Journal of Political Economy, Vol. 89, No. 2, (April 1981), pp . 372-391.

• b/ caring-for-caring exchanges. parents take care of children when they are young and in return children take care of parents. One problem with such exchanges is that children are not capable of being partners in exchange: their decision-making skills take a long time to develop. It is more conceivable that adult offspring exchange grandparents’ childcare services for taking care of elderly parents when they will be needing such care.

http://ideas.repec.org/a/ucp/jpolec/v89y1981i2p372-91.html




More on exchanges of time for money in extended families• Two directions:• downstream money flow exchanged for care-giving. Consider older parents

who make transfers to their adult offspring in exchange for the offspring caring for them• upstream money flow exchanged for care-giving. Adult offspring make

transfers to their parents in exchange for the grandparents taking care of their young grandchildren.

• Such exchanges don’t exclude altruism. A caregiver may be motivated by altruism (love) but if costs are very high he may still be expecting a payment that is sufficiently high to induce him to provide the care.


Downstream transfers and upstream care-giving. • There is an extensive literature on downstream monetary transfers taking the

form of inter-vivos transfers or bequests. For example, Charles Horioka (2014) analyzed survey data on the strength of bequest motives, stated bequest motives, and bequest division collected in China, India, Japan, and the United States• He found the bequest plans of the Japanese and Chinese to be more consistent

with selfish preferences than those of Americans and Indians: e.g. the latter were less likely to state that “they will leave an inheritance to their children, no matter what”. • in the U.S.A. and India respondents were more likely to prefer equal division of

their bequests among all children, which indicates less evidence of exchanges of money for care-giving. These differences across the 4 countries could be related to differences in religion. They are not easily explained by differences in income.


Downstream transfers (cont.) • Much research that has attempted to identify self-interested downstream transfers has focused

on identifying money-for-caring exchanges. • Bernheim et al. (1985) pointed out to differences between one-child and multiple-child families

in view of the more credible threats of disinheritance that parents can make when they have more than one child. They found that in the case of multi-child families parental bequeathable wealth was positively related to offspring’s frequency of phone calls and visits, which is consistent with the existence of an exchange motive.

• Degree of altruism can be inferred from the observed relationship between recipients’ income and amount transferred. The more positive that correlation, the more there appears to be an exchange motive: larger payments may be needed to induce caring by adult offspring with a higher value of time. Evidence has led Cox (1987) to conclude that bequest donors are not so altruistic.

• Bequest and savings literature typically does not use data on time adult offspring spend caring for their parents.

• Refs: Bernheim, H. Douglas, Andrei Shleifer, and Larry Sommers. (1985). “The strategic bequest motive.” Journal of Political Economy 93(6): 1045-1076; Cox, Donald. (1987). “Motives for private income transfers.” Journal of Political Economy 95(3):508-546.

http://link.springer.com.libproxy.sdsu.edu/article/10.1007/s11150-012-9156-7/fulltext.html#CR4


Downstream transfers (cont)• Using recent U.S. panel data for parental households above age 70, including information on

the amount of time their adult children spent caring for them, Monika Lopez-Anuarbe found that parents provide more inter-vivos gifts to children who had provided them with caring time in the past. (Ref: Lopez-Anuarbe, Monika (2013). “Intergenerational Transfers in Long Term Care.” Review of Economics of the Household 11(2): 235-258. )

• This can be interpreted as parents paying for offspring’s past care-giving. • Lopez-Anuarbe also analyzed panel data for adult children, including information on their

time use and on gifts from their elderly parents, and found that • Where offspring’s caregiving is less costly to supply the offspring spend more time taking care of parents,

which is consistent with the existence of an upward-sloping supply of care-giving. • Number of hours of offspring’s care-giving was higher where states provided more support for caregivers and when travel distance was shorter (of course, distance from parents is another one of these endogeneous variables…).


Upstream transfers and downstream care-giving• This is another form of exchange within extended families. As in the

case of downstream monetary transfers, the offspring and the parents may also be motivated by altruism.• For example, grandparents may take care of their grandchildren in

order to help their adult offspring. As is common in the developing world, the offspring may earn more than their parents and may “pay” them for the childcare services they provide.


Upstream transfers (cont.)• Example: Cheolsung Park’s (2014) study of the determinants of upstream transfers in South Korea, a

country that has experienced rapid economic growth in recent decades (Ref: “Why do children transfer to their parents? Evidence from South Korea” by Cheolsung Park Rev Econ Household (2014) 12:461–485)

• Is there exchange of parental child care for upstream transfers from offspring to parent? If so, the transfer amount is likely to be positively correlated with parental income (the opportunity cost of parental services is higher if parents’ income is higher).

• He finds that • children don’t transfer less to the parents whose income is higher than theirs, which is not consistent with the

altruistic motive, but suggests that upstream transfers are to some degree payment for grandparents’ child care. • the amount of transfer has a positive relationship with the number of children under age 7 in the offspring

household if both the offspring and the offspring’s spouse are employed in the labor force (indicating more need for child care by grandparents).

• Grandfathers without a spouse receive smaller transfers than older married couples or grandmothers without a spouse, a function of grandmothers providing more childcare.


Generalizing results on exchanges in extended families• Juxtaposing research on three outcomes thus suggests that there are

exchanges of care-giving for money within extended families: • Some positive association between what one generation pays and the

amount of work supplied by the other generation (altruism would suggest a negative association)• Weak evidence that the individual supplies of intergenerational caregiving

are upward-sloping: the higher the net pay-off the more care is provided.


Can we generalize this insight to intra-household exchanges?• Do husbands and wives have exchanges of caring work for money,

similar to such exchanges between adult parents and their grown children?


Exchanges inside Nuclear families• I will focus on • Exchanges between partners/spouses. Part of Economics of Marriage (one

could also study parent/child exchanges when children are young and part of nuclear family) • More specifically I will focus on• Exchanges of caring work for money

• Caveat: Let is keep in mind that as in the case of extended families• There is much altruism/love that motivates individual decisions• There are other types of exchanges, especially exchanges of caring time

(reciprocity)


Economic analysis of exchanges of caring time for money within couples

Compared to Economic analyses of such exchanges in extended families, economics analyses of exchanges within couples have• The disadvantage of little data; who collects data on how much money is being

transferred between husband and wife? No major data sets used in economics, but household finance studies

• The advantage that men and women chose their mates, rather than being affiliated with

a parent or a child. Therefore, it is possible to apply market analysis


Marriage markets conditions can influence consumption and allocation of time• The idea that “Marriage markets consumption” started with Becker’s

(1973) demand and supply (D&S) graphical analysis. Ref: Becker, Gary S. (1973). “A Theory of Marriage: Part I.” Journal of Political Economy 81(4): 813-846.[Note: Becker’s theory of marriage includes many models other than the D&S models –see Grossbard (2010). “How ‘Chicagoan’ are Gary Becker’s Economic Models of Marriage?” J of History of Economic Thought, 32(3):377-395.] [Marriage markets have also been mentioned by sociologists and demographers prior to Becker 1973, but they rarely made the connection between D&S levels and individual consumption]

• Advantages of D&S analyses of marriage include simplicity and compatibility with well-known price-theoretical models of markets for goods and resources.


Sex ratios are an important and easy-to-measure indicator of Marriage Market conditions

• Sex ratios are the ratios of men to women who could possibly marry each other in a marriage market. • Basic idea in Becker: sex ratios affect a person’s implicit price in

marriage in terms of his or her share of marital income, thereby influencing individual consumption of married men and women.

• Becker published two D&S analyses of sex ratio effects, including • Model 1 in Becker (1973, Fig. 1), which presents a market for men willing to

marry. He assumes monogamy, that all men are identical, and that all women are identical. • Model 2: a hedonic model with many types of men and women.


Becker’s models with analyses of sex ratio effects on consumption ..Model 2• Becker (1973) expanded this D&S analysis of sex ratio effects to marriage markets

for women and men of a particular type when there are large numbers of types of men and women who could serve as substitutes. He graphed a Marshallian D&S model for a particular type of man and a particular type of woman (Fig. 2). [Rao (1993) is possibly the first to have used the term ‘hedonic’ to describe this kind of multi-market D&S model of marriage.]

• Higher sex ratio more demand for brides relative to supply women obtain a higher price men let women get higher portion of marital income, i.e. women’s personal consumption is relatively higher compared to that of their husbands

Higher Sex Ratio Higher relative D for women Higher p of women Higher consumption for wives relative to husbands


Problem with Becker’s models with analyses of sex ratio effects on consumption

• In all of Becker’s models of marriage, marriage involves a total merger of income, resources and home production.


My Demand and Supply (D & S) model of marriage• I dropped Becker’s assumption that marriages are total mergers between two individuals. I assume that

individuals remain independent decision-makers whether they are married or not while they are part of small non-profit firms in which at least one spouse does household production work.

•Work-In-Household (WiHo) is defined as time in household production that benefits a spouse [Source: Amyra Grossbard. "An Economic Analysis of Polygamy: The Case of Maiduguri," Current Anthropology, 17 (4): 701-707, 1976; Amyra Grossbard-Shechtman. "A Theory of Allocation of Time in Markets for Labor and Marriage," Economic Journal, 94(4): 863-882, 1984.]

•Marriage institutions regulate labor contracts between independent spouses, in a manner similar to how employment institutions regulate labor contracts between workers and employers (see Shoshana Grossbard-Shechtman and Bertrand Lemennicier. "Marriage Contracts and the Law-and-Economics of Marriage: an Austrian Perspective,"Journal of Socio-Economics, 28: 665-690, 1999).


Readings: More on WiHo and its price: Grossbard 2015,


• Adapting Becker’s sex ratio analyses to markets for WiHo and adding the assumption of traditional gender roles


Hours of women’s WiHo

Price of WiHoSupply of WiHo by women

A Market for Women’s WiHo benefiting Men

Demand for women’s WiHo by men

Equil price

Equil quantity


The WiHo model (cont.)• leads to the same prediction that Becker obtained. Now consider a

higher number of men, but the number of women remains the same. The demand is now the red demand:


Hours of women’s WiHo

Price of WiHoSupply of WiHo by women

A Market for Women’s WiHo benefiting Men

Demand for women’s WiHo by men

Equil price

Equil quantity

Demand when more men

Higher price


Sex ratio effects ac to the WiHo model• Direct relationship between sex ratios and women’s relative

consumption in a couple:• Higher sex ratio wives’ consumption in marriage high relative to

that of husbands


Sex ratio effects (cont.)• Same conclusion follows from bargaining models, such as Apps & Rees, Chiappori,

etc.• Two advantages of WiHo analysis relative to Becker’s analysis and that of other

models: • In my model the implicit price is not the price of a person (husband or wife) as in Becker, it is

the price of the time that a WiHo-working spouse spends working for the benefit of another spouse. • Sex Ratio Analysis of consumption can be easily extended to the

analysis of (1) sex ratios and labor supply and (2) sex ratios and savings. • Refs: Apps, Patricia and Ray Rees (1988). “Taxation and the Household.” Journal of Public Economics

35:355-369; Chiappori, Pierre-Andre (1988), "Rational Household Labor Supply." Econometrica 56:63-90.


Sex ratios and labor supply• Higher sex ratios higher implicit prices of women’s WiHo where

traditional gender roles prevail higher women’s opportunity cost of work in the labor force.

When sex ratios are higher women (men) will supply less (more) labor to the labor market

Easy to test since there are data on sex ratios and data on labor supply. Implicit prices can’t be measured. Data on individual consumption by husbands and wives became available relatively recently, and they are still problematic. Many goods are household public goods and not assignable to an individual


My work on sex ratios and labor supply• Hypothesis was first formulated in David M. Heer and Amyra

Grossbard-Shechtman. "The Impact of the Female Marriage Squeeze and the Contraceptive Revolution on Sex Roles and the Women's Liberation Movement in the United States, 1960 to 1975," Journal of Marriage and the Family, 43(1): 49-65, 1981. • It was formally derived in Amyra Grossbard-Shechtman. "A Theory of

Allocation of Time in Markets for Labor and Marriage," Economic Journal, 94(4): 863-882, 1984 I spent many years testing it in various papers,• Evidence: Using cohort variation in sex ratio


Sex ratio effects on additional outcomes• Sex ratios affect women’s relative bargaining power in markets for dating

and marriage.• In a joint paper with the late demographer David Heer we postulated that

if sex ratios are low, i.e. women in oversupply, the price of their “services”, including their supply as partners in sexual relationships, would be lower. Assuming that men have more of a preference for short-term relationships relative to women, if men’s bargaining power increases due to lower sex ratios, there will be more casual sex, fewer marriages, more children born out of couple. • We also associated low sex ratios with higher participation of women in

labor force and higher education


A natural experiment in low sex ratios/ Cohort variation in sex ratio• The first baby-boomers born right after WW II. Since so few babies were born

during the war, the women born after the war had to face ‘marriage’ markets with low sex ratios. According to a simple calculation, assuming all men are two years older than the women when they first marry/date the sex ratio of men born in 1944-1948 to women born in the years 1946-1950 was 87 men for every 100 women. 13 missing men!!!• Heer and GS 1981 thus explained why first baby boom women experienced:

women’s labor force participation while married, enrollment in higher education, births out of couple, rapid increase in non-marital cohabitation.• Shoshana Grossbard-Shechtman and Clive W. Granger. "Women’s Jobs and

Marriage, Baby-Boom versus Baby-Bust," Population, 53: 731-52, September 1998 (in French: Travail des Femmes et Mariage du baby-boom au baby-bust”).


Opposite case, another natural experiment• Low sex ratios for the cohorts born around the legalization of abortion in the US• Due to drastic reduction in births in the period 1970 to 1974, the sex ratio for

men born in 1969 to 1973 divided by women 1971 to 1975 was very high: 1.07, i.e. 7 missing women for every 100 men• As a result: slow growth (and even some declines) in married women’s labor

force participation (Shoshana Grossbard and Catalina Amuedo-Dorantes. “Cohort-level Sex Ratio Effects on Women’s Labor Force Participation,” Review of Economics of the Household 5:249-278, 2007.)• It does not appear that marriage rates went back up, however, but a careful

study of the type we did for labor supply could detect changes in trends consistent with changes in sex ratios.


Cohort variation, sex ratio and labor supply of women• for the years 1965-2005 for four U.S. regions and multiple

cohorts, we assume fixed difference in men and women’s age at marriage and showed that the higher the sex ratio the less married women are likely to participate in the labor force. [source: Shoshana Grossbard and Catalina Amuedo-Dorantes. “Cohort-level Sex Ratio Effects on Women’s Labor Force Participation,” Review of Economics of the Household 5:249-278, 2007. ]• The higher men’s age at marriage relative to that of women the smaller the

impact of an imbalance in the sex ratio of people the same age (d’Albis and de La Croix 2012).Ref: d’Albis, Hyppolite and David de la Croix (2012) Missing daughters, missing brides? Economics Letters 116, 358-360.


Testing for sex ratio effects on labor supply Using cross-sectional dataPrediction: women supply less labor and men supply more labor when sex ratios are higher in a particular geographical area. However, since migration could be the result of better labor market opportunities it is hard to prove that in these geographical comparisons the causality runs from sex ratio to labor supply. [source: Shoshana Grossbard-Shechtman and Matthew Neideffer. “Women’s Hours of Work and Marriage Market Imbalances,” in Economics of the Family and Family Policies, edited by Inga Persson and Christina Jonung, London: Routledge, 1997; and Chiappori, Pierre-Andre, Bernard Fortin and Guy Lacroix ((2002). Marriage market, divorce legislation, and household labor supply. Journal of Political Economy, 110, 37-71.]


Sex ratio analyses also in sociology and social psychology

• In particular: Guttentag, Marcia and Secord, Paul F. (1983) Too Many Women: The Sex Ratio Question. Beverly Hills: Sage Publications.• This book made similar inferences about effect of sex ratio on a

number of outcomes related to marriage markets; many of the same insights as in Heer and GS.


Sex ratio and savings• If sex ratios are expected to affect consumption in a one-period model

they will also affect consumption over different time periods, and therefore they will affect savings rates.


Sex ratios also affect savings• Has recently been documented by Du and Wei (2013) and Wei and Zhang (2011)

using Chinese and cross-country data. They find that savings rates rise when sex ratios are higher. (refs: Du, Qingyuan and Shang-Jin Wei (2013). “A Theory of Competitive Saving Motive,” Journal of International Economics 91: 275-289; Wei, Shan-Jin and Xiaobo Zhang (2011) “The Competitive Savings Motive: Evidence from Rising Sex Ratios and Savings Rates in China,” Journal of Political Economy 119 (3): 511-564.• This is consistent with an analysis of sex ratio effects on marriage markets assuming

traditional gender roles and that changes in overall savings are dominated by changes in men’s savings. A higher implicit market price for women working in WiHo after marriage (due to higher sex ratios) implies that men may be induced to save more prior to marriage, so they can better afford marriage. [More on this topic is found in Grossbard and Pereira (2010) and my recent book: Shoshana Grossbard and Alfredo M. Pereira “Will Women Save more than Men? A Theoretical Model of Savings and Marriage” CESifo Working Paper No. 3146, August 2010.]


Other applications of marriage market analysis using possible indicator of caring time: time in chores

• Compensating differentials in marriage. In hedonic markets with men and women with different characteristics the individuals with characteristics that are relatively not in demand (for instance old vs young; black vs white where there is a preference for light complexion) will have to pay compensating differentials. This may take the form of working more either in household production or in the labor force. [More about this in Shoshana Grossbard, Jose Ignacio Gimenez and Jose Alberto Molina. “Racial Intermarriage and Household Production”, Review of Behavioral Economics 1(4):295-347, 2014.]


Economic analysis of marriage AND Law and Economics • Many implications of this kind of analysis to the field of Law and Economics. Are

marriage laws fulfilling their purpose? Divorce laws? Age at marriage laws? Laws imposing monogamy?• Here is a list of my publications on these topics:

On polygamy:• Shoshana Grossbard. "Polygamy and the Regulation of Marriage Markets" in The

Polygamy Question, edited by Janet Bennion and Lisa Fishbayn Joffe Utah State University Press/University Press of Colorado, pending May 2015.• Shoshana Grossbard. "

Sex Ratios, Polygyny, and the Value of Women in Marriage—a Beckerian Approach", J of Demographic Economics, vol 81 (1), pp13-25, 2015.

http://www-rohan.sdsu.edu/faculty/sgs/documents/my_chapter_on_poly_2015.pdf

https://www.researchgate.net/publication/271196320_Sex_Ratios_Polygyny_and_the_Value_of_Women_in_Marriage_A_Beckerian_Approach




On Common Law Marriage• Shoshana Grossbard and Victoria Vernon. "

Common Law Marriage and Male/Female Convergence in Labor Supply and Time Use", Research in Labor Economics, Vol. 41 on Gender Convergence in the Labor Market, pp. 143-175, 2015.• Shoshana Grossbard and Victoria Vernon. "

Common Law Marriage and Couple Formation", Special issue in honor of Gary Becker, IZA Journal of Labor Economics 3:16, 2014. • Amyra Grossbard-Shechtman. "

A Theory of Marriage Formality: The Case of Guatemala," Economic Development and Cultural Change, 30(4): 813-830, 1982.

https://www.researchgate.net/publication/261712287_Common_Law_Marriage_and_MaleFemale_Convergence_in_Labor_Supply_and_Time_Use

https://www.researchgate.net/publication/261712287_Common_Law_Marriage_and_MaleFemale_Convergence_in_Labor_Supply_and_Time_Use

https://www.researchgate.net/publication/269420624_Common_law_marriage_and_couple_formation

https://www.researchgate.net/publication/24097243_A_Theory_of_Marriage_Formality_The_Case_of_Guatemala


On marriage contracts• Shoshana Grossbard. "Repack the Household: A Comment on Robert Ellickson's

Unpacking the Household," in Yale Law Journal Pocket Edition, April, 2007.• Shoshana Grossbard-Shechtman and Bertrand Lemennicier. "

Marriage Contracts and the Law-and-Economics of Marriage: An Austrian Perspective," Journal of Socio-Economics, 28: 665-690, 1999.• Shoshana Grossbard. "Competitive Marriage Markets and Jewish Law," in The

Economics of Judaism and Jewish Human Capital, edited by Carmel U. Chiswick and Tikva Lecker with Nava Kahana. Ramat-Gan, Israel: Bar Ilan University Press, (2002) Revised Version 2006.• Amyra Grossbard-Shechtman. "Economics, Judaism, and Marriage," Dinei

Israel, A Journal of Science and Jewish Law, 1986 (in Hebrew).

https://www.researchgate.net/publication/259196580_Repack_the_household_a_comment_on_Robert_Ellickson's_Unpacking_the_Household



http://www-rohan.sdsu.edu/faculty/sgs/documents/gs_and_lemen1999.pdf

http://www-rohan.sdsu.edu/faculty/sgs/documents/gs_and_lemen1999.pdf

https://www.researchgate.net/publication/245723373_Competitive_Marriage_Markets_and_Jewish_Law


On Divorce• Olivia Ekert-Jaffe and Shoshana Grossbard. "

Does Community Property Discourage Unpartnered Births?" European J of Political Economy 24(1):25-40, 2008.• Shoshana Grossbard-Shechtman. "Marriage Market Models" in M.

Tommasi and K. Ierulli (eds.), The New Economics of Human Behavior. Cambridge: Cambridge University Press, 1995. • Shoshana Grossbard-Shechtman "

The Economics and Sociology of Marriage: Historical Trends and Theories of In-Marriage Household Labor": in S. Grossbard-Shechtmand and C. Clague (eds.) On the Expansion of Economics, Armonk, N.J.: M.E. Sharpe. 2001

https://www.researchgate.net/publication/4912158_Does_community_property_discourage_unpartnered_births



http://www.researchgate.net/publication/259196511_Marriage_market_models?ev=prf_pub

https://www.researchgate.net/publication/271326489_The_Economics_and_Sociology_of_Marriage_historical_trends_and_theories_of_In-Marriage_Household_Labor

https://www.researchgate.net/publication/271326489_The_Economics_and_Sociology_of_Marriage_historical_trends_and_theories_of_In-Marriage_Household_Labor


Conclusions• I hope I have been able to generate a bit of interest in the analysis of marriage

markets and marriage contracts. At the root of this analysis are simple D & S models of dating and marriage• The analysis uses IMPLICIT prices for the caring work of men and women that

they are willing to supply in a couple (possibly married). Analyses of marriage typically don’t have data on prices.• An exception: data on brideprice and dowry. My own work on that topic is found in (Book) Shoshana Grossbard-Shechtman On the Economics of Marriage - A Theory of Marriage, Labor and Divorce. Boulder, CO: Westview Press, 1993. David Bishai and Shoshana Grossbard. “Far Above Rubies: The Association between Bride Price and Extramarital Sexual Relations in Uganda”, J of Population Economics23(4): 1177-1188, 2010.

https://www.researchgate.net/publication/259197025_On_the_Economics_of_Marriage_a_Theory_of_Marriage_Labor_and_Divorce


Conclusions (cont.)• Nevertheless, marriage market analyses can proceed without data on

prices of brides and grooms or WiHo prices, because observable outcomes are related to such implicit prices in at least 3 cases:• Consumption• Labor Supply• Savings

• Marriage market analysis assumes that prices exist, and of course this implies that there are exchanges. If they are exchanges of time for money, the prices can be interpreted as the “WAGES” paid for caring work in the household.


Conclusions (cont. ) • Household economics encompasses much more than marriage

market analysis: it deals with many outcomes and many explanatory factors. Today I also discussed exchanges of caring time for money in extended households, between parents and grown children. • Household economics is not only about exchanges of time for money

but about all outcomes that are analyzable within the framework of economics, perhaps with the help of psychology, sociology, and other disciplines.• There is clearly much more that can be done to enrich our knowledge

in household economics.


The Review of Economics of the Household has already Published innovative articles that enrich Household Economics.We hope to publish many more in the future

Thank you.

Economy & Finance

Household economics keynote sep 4 2015 edited sept 10