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ABSTRACT
Common preference models of family behavior imply income pooling, a restriction on family demand functions such that only the sum of husband's income and wife's income affects the allocation of goods and time. Testing the pooling hypothesis is difficult because most family income sources are not exogenous to the allocations being analyzed. In this paper, we present an alternative test based on a "natural experiment"-a policy change in the United Kingdom that transferred a substantial child allowance to wives in the late 1970s. Using Family Expenditure Survey data, we find strong evidence that a shift toward greater expenditures on women's clothing and children's clothing relative to men's clothing coincided with this income redistribution.
I. Introduction
Traditional models of family behavior assume that family members act as if they are maximizing a single utility function. The common preference ordering may be the outcome of consensus among the family members (Samuelson 1956) or the preferences of a dominant family member (Becker 1981). Other models have challenged this "unitary" or "common preference" approach and have attempted to incorporate divergent and conflicting preferences of individual family members into economic analysis. The allocation mechanism in these individual utility models includes cooperative bargaining (Manser and Brown 1980; McElroy and Horney 1981; Lundberg and Pollak 1993), noncooperative bargaining (Kanbur and Haddad 1994; Lundberg and Pollak 1994; Bergstrom 1996), and a generic "collective" approach which avoids specifying a particular model of intrafamily allocation but assumes that family allocations obey a Paretoefficient sharing rule satisfying certain regularity conditions (Chiappori 1988, 1992). 1
The common preference model implies pooling, a restriction on family demand functions that is both simple and of considerable practical importance. If all income is pooled and then allocated to maximize a single objective function, only total family income will affect family demand. Which family member receives or controls income is irrelevant to the allocation of family resources. Thus, the pooling hypothesis implies the ineffectiveness of targeted transfer policies: transfer policies that attempt to redistribute income to particular family members will be neutralized by the intrafamily allocation process-a form of Ricardian equivalence. In contrast, individual utility models of the household permit the income received or controlled by one family member (for example, the wife) to have a different effect on...