Non-Unitary Household Income Pooling
RCTReview
Classical economic models assume married couples act as a single unitary entity that pools all income regardless of which spouse receives it. Testing whether household labor decisions depend on which individual physically receives a financial windfall determines whether intra-household bargaining models are required.
Picture this
Imagine two roommates who share household chores and expenses. If one roommate finds a hundred-dollar bill on the sidewalk, that roommate reduces personal household chores significantly more than the other roommate does, proving that individual ownership of money grants personal decision-making power rather than being shared completely equally.
What the evidence says
Winning spouses reduce pre-tax labor earnings by 0.965 SEK per 100 SEK won, whereas non-winning spouses reduce earnings by only 0.408 SEK per 100 SEK won (p = 0.045 for the differential response), rejecting the income-pooling prediction of unitary household models.
- Who was studied
- N = 142,102 married Swedish lottery players and their spouses (human adults in Sweden).
- How
- Comparative regression analysis measuring 5-year pre-tax annual labor supply adjustments of winning spouses versus non-winning spouses using randomized lottery prize cells.
What to do
Evaluate policy interventions and tax transfers by assigning financial benefits directly to specific individuals rather than treating married households as single homogeneous units.
From the source
"The earnings response is stronger for winners than their spouses, which is inconsistent with unitary household labor supply models."
f8929526-9215-4a78-95ce-8377460687e7-The Effect of Wealth on Individual and Household Labor Supply- Evidence from Swedish Lotteries..pdf