Working Paper: NBER ID: w26511
Authors: Marcos Rangel; Duncan Thomas
Abstract: Extremely rich data on farm households in Burkina Faso are used to test whether resource are allocated Pareto efficiently. The complexity of household structures, including multi-generation and polygynous households, is taken into account to developing tests from theoretical models of behavior. Credible measures of bargaining power are constructed exploiting the fact that individuals within a household have well-defined property rights over the plots they own. Using data on consumption choices, we establish that in farm households headed by a monogamous couple (with no co-resident adult sons), resource allocations are consistent with efficiency. In more complex household structures, including polygynous households, efficiency in allocations is not rejected in models that allow more than two household members to have agency in decision-making. In contrast, tests for efficiency based on whether the same farm households maximize profits by equating marginal products across plots are rejected for all household types. Further, these same tests indicate individuals do not equate marginal products across their own plots. We conclude, therefore, that tests of models of resource allocation based on production-side decisions are likely to be misleading. In contrast, the consumption-side tests provide novel insights into the nature of decision-making within complex households.
Keywords: household decision-making; resource allocation; Pareto efficiency; bargaining power; Burkina Faso
JEL Codes: J1; O13; Q15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| households headed by a monogamous couple without coresident adult sons (J12) | resource allocations are consistent with Pareto efficiency (D61) |
| polygynous households and those with adult sons (J12) | resource allocations remain Pareto efficient (D61) |
| production-side tests (C12) | households fail to maximize profits by equating marginal products across plots (D13) |
| consumption-side tests (D12) | robust evidence against the null hypothesis of inefficiency in consumption allocations (D61) |