Drug Consumption and Intrahousehold Distribution of Resources: The Case of Khat in Djibouti

1
Drug Consumption and Intra-household
Distribution of Resources The Case of Khat in
Djibouti

• Seminar
• Federico Perali
• Department of Economics
• University of Verona, Italy
• Assistance in Institutional Strengthening and
  Agricultural Policies
  
• Damascus, September 15 2002

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Motivation

• Who is better off?
• A poor child living in a rich household or a rich
  child living in a poor household?Economists may
  have something to say in terms of material needs
  ... less in terms of immaterial needs...

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Objectives

• Identify the sharing rule between adults and
  children in Djiboutian families
  
• We use Khat consumption and expenditures on
  childrens education to learn about the
  intrahousehold decision process
  
• Definition. Sharing rule is the rule governing
  the intrahousehold allocation of resources
  (money, time, goods).
  
• It is a measure of household inequality and of
  the distribution of power among household
  members.
  
• Being a function it is a policy interesting
  object.

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Introduction to the analysis of the
intra-household allocation of resources

• TRADITIONAL APPROACHES FAMILY AS A BLACK BOX
• UNITARY FRAMEWORK THE FAMILY UTILITY FUNCTION
  IS INCREASING IN THE UTILITY OF THE MEMBERS,
  INDIVIDUAL AND HOUSEHOLD WELFARE MOVE IN THE SAME
  DIRECTION
• ALTERNATIVES APPROACHES FAMILY AS A DYNAMIC
  ORGANIZATION OF INDIVIDUALS
  

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Introduction to the analysis of the
intra-household allocation of resource

• THE INTRA-HOUSEHOLD ALLOCATION OF RESOURCES IS
  EXPRESSION OF THE DISTRIBUTION OF THE BARGAINING
  POWER WITHIN THE FAMILY AND OF THE UNDERLYNG
  DECISIONAL PROCESSES
• TAKING INTO ACCOUNT THE INTRA-HOUSEHOLD
  DISTRIBUTION OF RESOURCES IS IMPORTANT TO
  MESASURE BOTH INDIVIDUAL AND HOUSEHOLD WELFARE
  
• THE WELFARE OF THE FAMILY MEMBERS DEPENDS ON HOW
  THE INCOME RECIPIENTS DECIDE TO SHARE THEIR
  RESOURCES BETWEEN INDIVIDUAL CONSUMPTION AND THE
  HOUSEHOLD BUDGET

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Sociological models

• For a traditional family with the husband as the
  breadwinner
  
• ALTRUISTIC HUSBAND
• PATERNALISTIC AND BENEVOLENT HUSBAND
• EGOISTIC HUSBAND

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Game theory as an instrument for interpreting the
allocation mechanism

• Family decisions as a bargaining problem
• COOPERATIVE MODELS

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Game theory as an instrument for interpreting the
allocation mechanism

• THE COOPERATIVE NASH SOLUTION AS THE MAX OF THE
  HOUSEHOLD WELFARE FUNCTION
  
• COOPERATIVE MODELS PARETO EFFICIENCY IMPLIES THE
  EXISTENCE OF THE SHARING RULE
  

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The Edgeworths Box and the cooperative Nash
solution
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Collective models and Sharing Rule

• THE COLLECTIVE MODEL ENCOMPASSES THE COOPERATIVE
  AND NON COOPERATIVE MODELS WHEN THE SOLUTION S
  PARETO EFFICIENT
  
• GIVEN THE EFFICIENCY CONDITION, A TWO STAGE
  DECISION PROCESS IS ASSUMED
  
• FIRST, THE TOTAL HOUSEHOLD INCOME IS ALLOCATED
  AMONG THE DIFFERENT MEMBERS ACCORDING TO THE
  SHARING RULE ESTIMATED FROM THE OBSERVABLE
  BEHAVIOR
• SECONDLY, EACH PARTNER DECIDE WHAT CONSUME ON
  THE BASE OF AN INDIVIDUAL BUDGET CONSTRAINT

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The Collective Model and the Sharing RuleThe
Pareto household program can be rewritten as an
individual problem (Chiappori 1992)
where phi(w,y) is the sharing rule
describing the intra-household allocation
process.
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Khat in Djibouti

• An individual .... Good (bad ?) and a social
  plague
  
• Women oppose khat consumption, an amphetamine, by
  the males because khateur household-heads are
  likely to be more irritable and are less aware of
  the family needs.
• Djibouti is characterized by widespread child
  malnutrition. Especially among poor households
  there are significant differences in the
  nutritional status of children and women between
  households with and without khateur members.
• While the shares of education and health in total
  expenditure are low across all population
  quintiles, the share of khat is relatively high
  across all population segments indicating
  substitution between khat and other goods,
  especially among the poor.
• Khat share of total budget 8 poor, 18 medium,
  23 rich segments of the population

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Definitions

• Definition 1 an exclusive good or bad is a
  private good-bad used by only one member of the
  household
  
• An exclusive good or bad is thus a good or bad
  for which it is possible to unequivocally
  identify the user.
  
• Definition 2 an assignable good or bad is a
  private good or bad whose consumption by each
  member of the household can be observed.
  
• Assignability depends on the fact that it is
  possible to observe who consumes the good and in
  what proportion.
  
• In the case of Djibouti it is appropriate to
  consider khat and cigarettes an exclusive good of
  the head of the household and of the adult males
  in general.

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Assumptions

• Assumption 1 Consumption Set up. Partner's
  labour supply fixed and absence of child labour .
  
  
• Assumption 2 Children Representative. Children
  elect the mother (not the father) as the
  representative of their preferences and wills.
  
• Assumption 3 Individual Preferences. Wife's
  preferences are egoistic with respect to the
  husband and altruistic with respect to the
  children husband's preferences are caring.
• Assumption 4 Exclusivity. Mother and children do
  not consume khat. Khat is an exclusive good
  consumed by the adult males and education an
  exclusive good of children.
• Assumption 5 No addiction. Khat consumption does
  not generate addiction in the strict sense of
  physical dependence.
  
• Assumption 6 Non-Consumption. The consumption of
  khat (or education) is absent in some families.
  This implies the presence of corner solutions.

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Khat Consumption and Labour Supply Decisions

• NEGATIVE HEALTH CONSEQUENCES OF CHEWING KHAT
• DOES KHAT CONSUMPTION AFFECT THE LABOUR SUPPLY
  DECSIONS AND THE LABOUR PRODUCTIVITY OF THE
  KHATEURS MEMBERS?

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Khat consumption and Labour supply decisions

• DOES KHAT CONSUMPTION AFFECT THE LABOUR SUPPLY
  DECSIONS OF THE NON KHATEURS MEMBERS?
  

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Household-head labour supply estimation two
stage Heckman estimation method
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Wife labour supply estimation two stage Heckman
estimation method
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Khat consumption and labour supply decision

• KHAT CONSUMTION SIGNIFICANTLY AFFECTS THE LABOUR
  SUPPLY DECISIONS OF BOTH KHATEURS AND NON
  KHATEURS MEMBERS
  
• INCREASING LABOUR FORCE PARTICIPATION OF THE WIFE
  IS NECESSARY IN ORDER TO PROVIDE THE FINANCIAL
  MEANS FOR COVERING THE ESSENTIAL NEEDS OF THE
  FAMILY

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Khat Consumption and Intra-household Resource
Allocation

• DOES KHAT CONSUMPTION AFFECT THE FAMILY WELFARE
  AND THE BUDGET SHARE DEVOTED TO OTHER GOODS?
  
• TWO EXCLUSIVE GOODS
• KHAT AS AN ADULT PRIVATE GOOD AND PULIC BAD
• EDUCATION AS A CHILDREN GOOD
• INTRA-HOUSEHOLD SHARING RULE BETWEEN ADULT MALES
  AND CHILDREN
  

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Khat Consumption and Intra-household Resource
Allocation

• A PARAMETRIC MODEL FOR ESTIMATING THE SHARING
  RULE
  
• Estimation generalized Heckman procedure to
  account for zero consumption
  
• TWO DEMAND EQUATIONS EXPENDITURE ON KHAT AND
  CIGARETTES AND EXPENDITURE ON EDUCATION
  
• THE SHARING RULE EQUATION IS A FUNCTION OF
  EXOGENUS VARIABLES AFFECTING THE DECSIONAL
  PROCESS BUT NOT INDIVIDUAL PREFERNCES
  

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Estimation

• with two exclusive goods the sharing rule is
  identified up to a constant
  
• METHOD JOINT ESTIMATION
• given

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RESULTS SHARING RULE ESTIMATESAverage estimated
sharing rule 0.64
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A Graph of the Sharing Rule
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Conclusions I

• The estimates of the sharing rule and labour
  supply decisions show the negative impact of khat
  consumption on the allocation of resources within
  the family and on the welfare of non khateurs
  family members
• khat is at the same time a private and a public
  bad
  
• The Sharing Rule average value, 64, indicates
  that khat is an adult good the consumption of
  which detracts resources that could be allocated
  amongst other members of the household and
  reinvested in education.

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Conclusions II

• Aspects related to income formation and estimates
  of the sharing rule are inextricably linked in
  Djibouti unemployment is a long-term structural
  problem. In general, males have greater access to
  the labour market they are more educated and
  find better qualified occupations.
• Because the head of the household is the main
  wage earner makes households dependent upon how
  the head chooses to divide his earnings between
  private consumption and the family budget.
• Income redistribution policies would need to take
  into account the equality of household resource
  allocation to eradicate poverty children are
  recipients of residual resources and women are
  negatively affected by an unbalanced resource
  distribution.