Sophia Wunderink

The economics of household behaviour

Introduction - The Neo-Classical Model and Some Extensions - Households versus Individual Economic Behaviour - Households in their Institutional and Social Setting - Household Labour Supply - Household Production and Leisure - Children and Household Expenditures - Dynamic Aspects of Household Formation and Dissolution - Dynamic Aspects of Household Consumption - Dynamic Aspects of Household Labour Supply - Investment in Human Capital and Intergenerational Transfers - Poverty, and the Distribution of Income, Welfare and Happiness - Appendix A Principles of Duration Models - Appendix B The Expected Present Value of Discounted Flows

Household Labour Supply

In Chapter 2 we distinguished three kinds of time use: paid labour, household labour and leisure. Although these categories seem to be well-defined, it is still sometimes difficult, if not impossible, to determine which label should be attached to an activity. Even for the category paid labour it can be a point of debate. The time we need for travelling to and from our job: does it belong to the category paid labour? Unpaid overtime at work, do we consider these hours as hours spent on paid labour? The choices made in different research projects vary with the questions that are to be answered. Different choices can be made by researchers. The same kind of problem arises when the wage rate is used in economic research. Should we use the gross or net wage rate, the marginal or average rate, and how should we deal with income in kind? Again, choices have to be made and the reader should always be aware of those choices.

Individual Financial Donations to Charities in The Netherlands: Why, How and How Much?

ABSTRACT Financial giving behavior of individuals to charities is analyzed, using demographic, personality and behavioral variables for explanation. Both the probability of a donation and the amount of the donation are analyzed, using data of 500 Dutch households. Donors give because they appreciate the good work of the organization, because it gives them a good feeling, or because they feel personally involved. Empathy with the final receivers influences the decision to give, but not the amount that is donated. When donations become a part of the donors “mental accounting” system, the average amount given is greater than for ad hoc donations.

Is family planning an economic decision

This study examines economic models of household choice and the role of economic factors in determining the timing of births. A static economic model is presented and tested with data from the Netherlands. After the availability of contraceptives, the family size variable shifted from being an exogenous to an endogenous one, because births could be regulated. Costs of childbearing were construed to have maintenance costs for parents and society, attendance costs of care, and intangible costs such as anxiety or personal freedom. Benefits were intangible ones, such as joy and happiness; income; public benefits; and attendance benefits. Intangible benefits enlarged the utility of children, but maintenance costs diminished resources available for consumption. Child quality was a product of market goods purchased by parents and others and household labor. Household time allocation varied with childs age. Private responsibility for children varied by country. Quality of child care varied between countries and over time. Quality was dependent upon economies of scale, variable costs by the age of the child, variable time commitments by age of the child, and market substitutes for private child care. Higher income families spent more money but less time on children. It is pointed out that Beckers model explained number of children, but not timing of births. Postponement of birth was unlikely for those with a limited education, an unpleasant job, and low wages. When the advantages and disadvantages of having a baby were positive, spouses or single women with a high subjective preference were expected to bear a child as soon as possible. Government policy can affect the average family size by increasing or decreasing the financial and/or time burden of children. Postponement may be chosen based on long term analysis of a couples future, the formation and use of capital, and/or high subjective time preference. Before and after first birth are different frames of reference for couples. Before the birth, the future may be vague. After the birth, life without a child becomes unimaginable.

Division of household labour: Facts and judgements

In this paper the division of household labour between partners is analyzed, based on data of the International Social Justice Project of 1990. We compare the results of four countries: Japan, Russia, The Netherlands, and the USA. Explanations for the division of housework may be found in economic and sociological theories. We first provide a short description of these theories. Then the theories are confronted with the data, using ordered response models. Our analysis leads to the conclusion that in The Netherlands and the USA economic variables have a significant effect on the division of houswork, but this is not (yet) the case in Japan and Russia. Next we analyze the perception of justice in the division of housework. First we formulate theories that could tell us when a distribution would be called fair. An equal distribution of paid and unpaid labour is considered very fair by the majority of the Russian, Dutch and American men and women, but not by the Japanese population. According to the Japanese fairness increases if the wives do all the housework and the husbands have a fulltime paid job.

Household versus Individual Economic Behaviour

Traditionally, the economic theory of consumer demand has taken the individual as a unit of analysis. Empirical work on demand systems, on the other hand, is usually based on data that take the household as the unit for data collection. In this chapter we shall investigate this discrepancy between the theory and practice of demand analysis, and possibilities of narrowing the gap.

Poverty and the Distribution of Income, Welfare and Happiness

The extent of poverty and the distribution of income are important characteristics of the state of a society. Banishment of poverty and an ‘equitable’ income distribution are acclaimed policy purposes worldwide. The two concepts ‘poverty’ and ‘income distribution’ are closely related. Although poverty refers to a particular state of well-being, which has many more dimensions other than income, poverty research usually focuses on the income aspect of well-being. One reason is that redistribution of incomes, by means of income taxation and income transfers, is the primary instrument for policies aimed at relieving poverty.

Dynamic Aspects of Household Formation and Dissolution

Over the course of their life-cycle most individuals typically will make several transitions from one type of household to another. Although the range of possible biographies in terms of household membership is virtually unbounded, most people experience transitions out of the parental home; marriage; the birth of one or more children; and the dissolution of the marriage, either because of death or because of divorce.

Household Production and Leisure

In this chapter we focus on the relationship between the time that household members spend on household production, volunteer activities and leisure. In the early neo-classical models all non-labour time was addressed as leisure, but since Becker (1965) introduced his New Home Economics theory, more attention has been paid to the productive activities in the household. Until then, production as represented in economic models seemed to be the monopoly of both private and public sectors. The fact that activities performed within the household do not appear in public statistics does not mean that they are not productive. As far back as 1941, Kuznets indicated that GNP per capita is not a good indicator for a country’s welfare, since household productive activities and volunteer labour, although affecting welfare, are not included in the GNP. The fact that the products of household production are not traded and have no market price does not mean that they have no value.

Households in Their Institutional and Social Setting

In the previous chapters it was assumed that household members make a rational choice, that is, they maximize utility given their preferences, incomes or wage rates of both partners, and constraints they are facing. In this chapter we shall pay attention to the household’s institutional and social setting, which is partly responsible for the constraints and which sometimes even affects household preferences and decisions.