Costas Meghir

Document Type

Discussion Paper

Publication Date

5-1-2014

CFDP Number

1948

CFDP Pages

81

Abstract

Studies of inequality often ignore resource allocation within the household. In doing so they miss an important element of the distribution of welfare that can vary dramatically depending on overall environmental and economic factors. Thus, measures of inequality that ignore intra household allocations are both incomplete and misleading. We discuss determinants of intra household allocation of resources and welfare. We show how the sharing rule, which characterizes the within household allocations, can be identified from data on household consumption and labor supply. We also argue that a measure based on estimates of the sharing rule is inadequate as an approach that seeks to understand how welfare is distributed in the population because it ignores public goods and the allocation of time to market work, leisure and household production. We discuss a money metric alternative, that fully characterizes the utility level reached by the agent. We then review the current literature on the estimation of the sharing rule based on a number of approaches, including the use of distribution factors as well as preference restrictions.

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