Ian Levely, Wageningen University – Københavns Universitet

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Ian Levely, Wageningen University

“Joint Production and Household Bargaining: an experiment with spouses in rural Tanzania” Job Market Seminar

Abstract
We present evidence that intra-household decision making can lead to inefficient outcomes. Specifically, we show that a spouse's control over the household budget increases with private earnings, but not with the share of earnings from a joint venture. This can prevent couples from working together, even when it is the most efficient option. We test this using a framed eld experiment with married couples in rural Tanzania. In this setting, many farm households exhibit seemingly inefficient behavior, raising multiple crops, each grown primarily by one individual, rather than concentrating household effort on the most profitable crop. In our experiment, spouses were assigned work in a real-effort task, earning vouchers that they spent together. In some treatments, we divided the task into multiple projects. We find that earning more increases bargaining power, but not if that income is earned from a "joint" project that involved both spouses. In a related choice experiment, we find that many subjects avoid joint projects, even when doing so is costly, and that these choices are correlated with lower agricultural income. Similar mental accounting could explain inefficient intra-household decision-making in other settings.

 Contact person: Henrik Hansen