Abstract
I examine assumptions about intra-household resource allocation, using panel from the World Bank’s Living Standards Measurement Study and Climate Hazards Group InfraRed Precipitation with Station data. I test for the complete pooling of household resources after the experience of a transitory shock, accounting for income earned individually by men and women, as well as income earned jointly by multiple household members. I find evidence that food expenditures do not respond to shocks; household members pool resources for this expenditure, even when individuals face substantial shocks to their income. All other expenditures respond to shocks. These findings are robust to inclusion and exclusion of income earned jointly, as well as controlling for household-level unobserved preference heterogeneity. This study extends our understanding of intra-household behavior, beyond standard utility, collective, and non-cooperative conceptions of the household in a panel data context.
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Notes
Of jointly managed income, in 2010, 1 percent is managed by individuals of the same gender, 1 percent a primary female manager and a secondary male manager, and the remaining 98 percent has a primary male manager and a secondary female manager. In 2013, 2 percent is managed by individuals of the same gender, 3 percent has a primary female manager and a secondary male manager, and the remaining 95 percent has a primary male manager and a secondary female manager. Excluding the households which are not male primary, female secondary managed has no significant impact on results. Thus, in the analysis, all shared income is designated as “joint”.
Within joint income, in more than 92 percent of cases, the first manager of the income is the household head, in seven percent of cases that person is the head’s wife or husband, and in less than one percent of cases that person is the child of the household head. When a secondary manager is specified, in more than 96 percent of cases, it is the husband or wife of the household head. It is the head is approximately two percent of cases, and either the child or parent of the head, in the remaining less than two percent. Somewhat unsurprisingly, when only one manager is specified, in more than 90 percent of cases, this individual is the household head.
This measure generally does not include rent. Of the households included in the analysis, approximately 2 percent do not own their properties, and thus may pay some rent on the building in which they live. Exclusion of renter households does not significantly influence results.
Additionally, ff(Lf, v) + fm(Lm, v) + fj(Lj, v) − w(Lf + Lm) can be simplified to \({\pi }_{f}^{* }(v)+{\pi }_{m}^{* }(v)\), in which \({\pi }_{i}^{* }=\mathop{\max }\nolimits_{{L}_{i}}{f}_{i}(v,{L}_{i})-w{L}_{i}\).
This functional form assumes that (1) commodity demands are log-linear in expenditure and (2) commodity demands are multiplicatively separable between λ and e.
Markets are assumed to be regionally integrated. We investigate this assumption further in Appendix A.1. With this assumption, at any point in time, prices are the same within a region and so is the effect of rainfall on relative prices. Demand is captured by the region-time indicator.
This is explored further in section 5.3.
Results of the unrestricted test are presented in Table 8 in Appendix A.2.
Appendix section A.2 presents and discusses the results if this stage did not exist.
Less than 10 percent of respondents indicated “both” and so these communities were grouped with those communities which trace lineage from their father. This entire group is simply classified as “non-matrilineal”.
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Acknowledgements
Many thanks to the thoughtful comments from the anonymous referees during the review process. This work was completed while the author was a Borlaug Fellow in Global Food Security, a program supported by USAID. The author has no relevant financial or non-financial interests to disclose. Thanks to Drs. Jeffrey D. Michler and Gerald Shively for their critical comments and constructive suggestions. Thanks also to the participants of the Centre for the Study of African Economics Annual Conference in 2017, hosted by Saint Catherine’s College in Oxford, England and to the participants of the 30th International Conference of Agricultural Economics, held in Vancouver, Canada. I am solely responsible for any errors or misunderstandings.
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Appendix
Appendix
1.1 Prices and price stability
An essential assumption in the theoretical and empirical models is that changes in consumption are driven by only changes in rainfall. This assumption implies that there is no indirect link between rainfall and consumption. An indirect link might exist if changes in rainfall induce changes in price, which impact consumption and thus household expenditures. In this section I briefly discuss some of the relevant literature which supports this assumption.
Timmer (2000) suggests that price stability has an essential role in the process of structural transformation and policies which work to stabilize prices are common around the world. Additional evidence in this area is supported by Chavas et al. (2005); Fox et al. (2011). Price stability observed is often the result of government and development agency policy efforts throughout Southern Africa (d’Hotel et al., 2013; Jayne et al., 2006). Efforts towards coordination, transparency, and consultation between stakeholders have improved price stability in recent years. Much of this achievement has come from the compiling of strategic grain reserves, as modeled in Tran et al. (2015) and Mason & Myers (2013).
Several studies, from Southern Africa generally and Malawi in particular, have explored the existence of price stability in cases where changes would be expected to shift prices. Ricker-Gilbert et al. (2013) considers the impact of fertilizer subsidy programs on maize price stability in Zambia and Malawi: they find that even doubling the subsidy results in only small price changes. The conclusions of this work are supported by Denning et al. (2009) who determine that input subsidies and maize surpluses improved price stability in Malawi.
Price stability is a reasonable assumption across much of Southern Africa, including Malawi, due to the prevalence of such programs and efforts to stabilize prices throughout the region. These findings and relevant literature support the assumption that changes in consumption are driven by only changes in rainfall experienced.
1.2 Additional tests and analyses
Table 8 presents the unconstrained estimates of the relationship between expenditure and rainfall. For each regression, nine rainfall variables, are included, as well as location indicators. These results are not disaggregated by gender and hence cannot address the potentially gendered nature of income earning and expenditure.
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Josephson, A. Intra-household management of resources: evidence from Malawi. Rev Econ Household (2024). https://doi.org/10.1007/s11150-024-09698-6
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DOI: https://doi.org/10.1007/s11150-024-09698-6