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Happily ever after? Intrahousehold bargaining and the distribution of utility within marriage

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Abstract

Using a rich longitudinal data set of married couples from the Korean Labor and Income Panel Study, this article seeks to uncover the intramarital allocation of experienced utility and its drivers. We find both substantial gains from marriage and effects of relative predicted earnings outside of marriage on relative gains from marriage. These findings are consistent with cooperative bargaining models and with models viewing individuals as having a demand for household production services by a spouse, with market forces influencing the price of such services. In addition, we find that men benefit more from marriage than women and that this gender gap is more pronounced for older couples. This is likely to be due to social norms and prescribed gender roles which are more prevalent within the older generation.

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Notes

  1. Children, in particular, benefited from the new policy.

  2. We consider goods that are (locally) public from the perspective of members of the same household, hence the expression public family good.

  3. In Manser and Brown (1980) and McElroy and Horney (1981) singlehood utility is viewed as fallback utility. In Lundberg and Pollak (1993) uncooperative behavior within marriage determines the fallback position in the bargaining game. Here, we use T i and T j to denote the individual threat points without making any assumption on how they have been determined.

  4. See Samuelson (1954).

  5. The data quality KLIPS provides satisfies highest international standards. The panel maintains 76.5 % of the original sample throughout all waves, which is comparable to the PSID (78 %); the German Socio-economic Panel (79 %); and the British Household Panel Survey (77 %). Kang (2010) shows that potential bias produced by attrition is negligible in KLIPS data.

  6. For a detailed description of all variables see Table 6 in the appendix.

  7. Note that Table 1’s results also hold when only estimated over married and never married, i.e., when excluding separated, divorced, widowed, and remarried individuals.

  8. The importance of using potential earnings instead of actual earnings has already been pointed out in earlier literature, e.g., Pollak (2005).

  9. We run a linear projection of the log of individual earnings on 10-year-age cohorts, six different levels of schooling, controls for the number of sons and daughters ever had, as well as provincial and year fixed effects. Regressions are run separately for women and men. The results of the earnings regressions are displayed in Table 7 in the appendix. Note that in further sensitivity tests we will expand the prediction equation by the following variables: diseases index, parental education, and lagged perceived economic status.

  10. Figure 3 in the appendix gives a first intuition how predicted relative spousal earnings potential outside of marriage is related to wives’ and husbands’ life satisfaction. It supports the notion that monetary outside options matter for the intrahousehold allocation of experienced utility.

  11. The variables included are related to age, education, health, education and economic background of parents, province of residence, number of children, and year. The prediction coefficients are displayed in Table 8 in the appendix.

  12. In a longer working paper version we further found the following: while husbands and wives both value spousal health, own health status enters one’s utility function two to three times as strong as spousal health. Moreover, women seem to care more about the relative income position of the household than men. The results can be obtained from the authors on request.

  13. We define young couples as couples with wives of age 40 or younger. Older couples are those with wives older than 40 years of age. The threshold at age 40 is similar to Ham and Song (2014).

  14. Note the consistency of findings across three major Korean data sets. While Jeon et al. (2007) use the 2001 Korean National Health and Nutrition Examination Survey, Jang et al. (2009) use the 2006 Korean Longitudinal Study of Ageing. Our results stem from the Korean Labor and Income Panel Study (2003–2008).

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Acknowledgements

The authors thank the Editor and an unknown reviewer for their very helpful comments. They further would like to thank the participants of the 24th IAFFE Annual Conference, the 11th World Congress of the Econometric Society and the 1st World Congress of Comparative Economics for valuable comments. The paper further benefitted from fruitful discussions with Stephan Klasen, Inma Martinez-Zarzoso, Jinyoung Kim, Beomsoo Kim, Seik Kim, and Sung-jin Kang. This research benefitted from Korea University (KU) research funding. Bethmann’s research was supported by the KU grant K1509031.

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Authors and Affiliations

  1. Department of Economics, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul, 136-701, South Korea

    Dirk Bethmann

  2. Division of International Studies, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul, 136-701, South Korea

    Robert Rudolf

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  1. Dirk Bethmann
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Correspondence to Robert Rudolf.

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Appendix

Appendix

See Tables 5–8 and Fig. 

Table 5 Distribution of life satisfaction by sex
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Table 6 Description of variables
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Table 7 Prediction coefficients for out-of-marriage labor earnings potential
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Table 8 Prediction coefficients for threat point life satisfaction
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Fig. 3
figure 3

Wife’s share in total predicted earnings and relative spousal happiness

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Bethmann, D., Rudolf, R. Happily ever after? Intrahousehold bargaining and the distribution of utility within marriage. Rev Econ Household 16, 347–376 (2018). https://doi.org/10.1007/s11150-016-9343-z

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