Neoclassical approaches to household decision making

The traditional neoclassical economic approaches to household decision making leaves no room for analyzing conflict between men and women. Households are seen as acting as a single unit, making choices as if households are seen as acting as a single unit, making choices as if household members were in full consensus. Even here, though, a case for targeting on the basis of gender can be made.

Gary Becker’s study on household

The unitary approach goes back to seminal work started by Gary Becker in the 1960’s. In particular, in his Treatise on the family, Becker assumes that male and female preferences can be aggregated into a common household objective function. They can analyze decisions about expenditures and “non economic” investments such as the number, education, and health of children. Household maximize their joint objective utility function subject to constraints on time use, technology, and hint resources. While the time allocation of each household member between the production of market. Household output matters those who in the family members is totally irreverent. A dollar is a dollar, no matter who in the family earns it. The approach, so focused as it is on efficiency, is sometimes called the “pure investment” model. It leaves no scope for intra-household conflict.

Becker’s interpretation

One of the Becker’s objectives was to understand how household allocate individuals to activities with household members seeking to gain from their comparative advantages. According to this approach, if the wage in the market sector is higher for males than for females, it would be efficient for men to work more in the market and for women to stay in the household (or to work in the informal sector). Becker argues that this is the best way to increase the household’s total output. He claims that this is a good representation of patterns seen in the United States in the 1960’s.

Becker’s study on developing nations

In principle, Becker’s predictions also apply to developing countries. In agriculture economies, there are a number of high-wage activities that require certain skills, such as physical strengths, for which gender matters. Becker’s framework in this case suggests that it is optimal for men to benefit from their comparative advantage by specializing in strength-intensive marketable agriculture activities outside the house. Women, on the other hand, should devote more time to unpaid household work and those marketable activities that require considerably less physical strengths. It remains unclear whether such unequal specialization within the household truly reflects women’s preferences.

Rosenzweig and Schultz (1982) [1] provide early evidence on the pure investment model, finding that survival probabilities for female infants in rural India are higher. It was found higher in areas where opportunities for female employment are greater. Their argument is that asymmetric mortality patterns result because potential. It is argued that such strategic decision making result from the need to sometimes make tragic, brutal choices in the struggle for basic survival.

Helping India

But micro-finance advocates repudiate the helplessness that is implied. First, by helping to raise incomes, advocates argue that micro-finance can lift the constraints that before household to make such life-and-death choices. As important, advocates argue that micro-finance can also change the nature of basis trade-offs. Rather than taking the structure of wages and employment as given, micro-finance advocates aim to improve opportunities and the economic returns to women’s work. Thus to change the economic value to women’s work, and to change the economic value of females within the home. Raising those returns can, in principle, reduce discrimination of the sort documented by Rosenzweig and Schultz (1982).

The pure investment model is a useful starting point, but Microsoft advocates go further. They argue that by raising women’s status within families, the nature of decision making can change too. Rather than assuming that household work by consensus, as argued by Becker, economists have recently started deconstructing household choices, finding them to be driven often by inequalities, bargaining, and conflict. Browing and Chiappori (1998), [2] for example, derive implications of a model in which bargaining power is driven by the ability of women to credibly threaten to leave the household. The credibility of those threats will depend on factors like earning power and other factor that affect women’s relatively power within the household, such as divorce or employment legislation. Access to micro-finance can potentially be part of this equation.

References

  1. Rosenzweig and Schultz (1982), You can hear Me Now: How Micro-loans and Cell phones are connecting the World’s poor to the Global Economy. San Francisco: John Wiley & Sons.
  2. Browing and Chiappori (1998), Bootstrap Capital: Microenterprises and the American poor. Washington, DC: Brookings Institution press
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Shreya Garg

Shreya is an MBA graduate from ICFAI Business School Hyderabad. She is also a graduate in Economics (Honors) from University of Rajasthan. Apart from her contribution towards writing for Project Guru, she is an Assistant Manager at ICICI Bank, Jaipur. She is an active writer at Project Guru for academic papers as well as Knowledge Tank. In her free time, she likes to read and dance.

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