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Title:Modes of spousal interaction and the labor market environment PDF Logo
Authors:Del Boca, Daniela
Flinn, Christopher J.
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2005
Abstract:We formulate a model of household behavior in which cooperation is costly and in which these costs vary across households. Some households rationally decide to behave noncooperatively, which in our context is an efficient outcome. An intriguing feature of the model is that, while the welfare of the spouses is continuous in the state variables, labor supply decisions are not. Small changes in state variables may result in large changes in labor supplies when the household switches its mode of behavior. We estimate the model using a nationally representative sample of Italian households and find that the costly cooperation model significantly outperforms a noncooperative model. This suggests the possibility of attaining large gains in aggregate labor supply by adopting policies which promote cooperative household behavior.
Subjects:household time allocation
Nash bargaining
Nash equilibrium
maximum likelihood
JEL:C79
D19
J22
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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