Working Paper: NBER ID: w11239
Authors: Robert A. Pollak
Abstract: What determines bargaining power in marriage? This paper argues that wage rates, not earnings, determine well-being at the threat point and, hence, determine bargaining power. Observed earnings at the bargaining equilibrium may differ from earnings at the threat point because hours allocated to market work at the bargaining solution may differ from hours allocated to market work at the threat point. In the divorce threat model, for example, a wife who does not work for pay while married might do so following a divorce; hence, her bargaining power would be related to her wage rate, not to her earnings while married. More generally, a spouse whose earnings are high because he or she chooses to allocate more hours to market work, and correspondingly less to household production and leisure, does not have more bargaining power. But a spouse whose earnings are high because of a high wage rate does have more bargaining power. Household production has received little attention in the family bargaining literature. The output of household production is analogous to earnings, and a spouse's productivity in household production is analogous to his or her wage rate. Thus, in a bargaining model with household production, a spouse's productivity in home production is a source of bargaining power.
Keywords: No keywords provided
JEL Codes: D1; J1; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage rates (J31) | well-being at the threat point (I31) |
| well-being at the threat point (I31) | bargaining power (C79) |
| wage rates (J31) | bargaining power (C79) |
| productivity in home production (D13) | bargaining power (C79) |
| earnings at the bargaining equilibrium (C79) | earnings at the threat point (D81) |