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Gary Becker

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Egalitarian marriage: this is where the value of work of yihi and the value of yjhj cancel each other out. 3. Reversed-role marriage: yjhj – PowerPoint PPT presentation

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Title: Gary Becker


1
Gary Beckers household economics how unitary
and how unified? 
  • By Shoshana GrossbardPrepared for Sciences Po
  • March 2010

2
Introduction
  • There are hundreds of references to Gary Beckers
    unitary models--the reference often being to
    his paper on the allocation of time (Becker 1965)
    or his Treatise on the Family (1981, 1991),
    models of the household that dont distinguish
    between decision-making agents.
  • The alternative to unitary models are models
    assuming that multi-person households include
    individual decision-makers. Such models have been
    coined individual models (Apps and Rees 2010)
    or collective models (Bourguignon, Browning,
    and Chiappori 1995). Most of those who refer to
    Beckers unitary model prefer to use such
    individual models.

3
Examples of lack of recognition of Beckers
individual models
  • As editor of Review of Economics of the Household
    I have read many papers who attribute unitary
    models to Becker. I googled to see how common
    this is and found many other articles giving
    Becker this same credit
  • For example, Tak Wai Chau, Hongbin Li, Pak Wai
    Liu and Junsen Zhang (2007) contrast their
    collective or individual labor supply model
    with the unitary model pioneered by Becker
    (1991) Other individual models of labor supply in
    multi-person households that have contrasted
    their own model with Beckers unitary model
    include Chiappori (1988) and Chiappori, Fortin
    and Lacroix (xx). Jill Tiefenthaler (1999) and
    Emily Klawon and Tiefenthaler (2001) have
    contrasted their bargaining models with Beckers
    unitary model of fertility.

4
Cont.
  • Models of care work such as Suzanne Bergeron
    (2009), child labor and school attendance such as
    Patrick Emerson and André Souza (2007) and of
    the demand for pets (see Peter Schwarz, Jennifer
    Troyer, and Jennifer Walker 2007) all contrast
    their individual model, which is typically a
    bargaining model or a collective model, with
    Beckers unitary model.
  • Most of these papers give credit to their
    favorite model, not recognizing that earlier
    models also took an individual non-unitary
    perspective. In fact, to the best of my
    knowledge, one of the many models that Gary
    Becker published is the FIRST individual economic
    model of household decision-making. It is one of
    the models found in his theory of marriage,
    originally published in the JPE in 1973

5
Basic competitive model of marriage in Becker
  • This model appears in both 1973 and 1981
  • Assume that
  • identical men and identical women are in the
    market for one another.
  • as a couple, a man and a woman can produce a
    composite good Zmf
  • This marital good exceeds the sum of the Zf a
    woman could produce alone and the Zm that a man
    could produce alone.
  • The market then may determine how the total gain
    from marriage Zmf Zm Zf is subdivided
    between husband and wife.
  • graph
  • if the number of men exceeds the number of women,
    i.e. the sex ratio exceeds one, the entire gain
    from marriage goes to women.
  • If the number of women exceeds the number of men,
    the entire gain from marriage goes to men.
  • If the number of men and women are the same, ??
    No market solution. This opens the door for
    (collective or private?) bargaining models.

6
Examples of insights from Beckers simple DS
model of marriage
  • The higher womens productivity in marriage, the
    more men are willing to pay
  • One can infer that when men have more income they
    will demand more wives
  • More advantageous marriage market conditions for
    women when number of men exceeds number of women,
    and vice versa (sex ratio effect)

7
Second DS model only found in Becker 1973
hedonic model
  • choice between mates of different types market
    for men of type i and women of type j
  • Hedonic to the extent that there are no prices
    for the valuable characteristics serving as the
    basis for distinguishing various types of men and
    women.
  • supply and demand takes account of possible
    substitution between mates belonging to a
    continuum of different types.
  • in these circumstances the equilibrium division
    of output in marriage can fall anywhere between
    the best division from a male point of view and
    the best division from a female point of view

8
Why second model only in 1973?
  • In a 2004 email I asked Becker that question
  • In his emailed response, he explained
  • My Treatise was considered by me to be a
    complement to my previous work, not a substitute.
    So I did not go over everything in the earlier
    papers that I considered to be valid and
    sometimes even important.
  • I never abandoned my view that imputations to
    men and women are determined by a competitive
    marriage market - what you call the supply demand
    framework.

9
  • Becker thus played a pivotal role in the
    development of individual decision-making models
    by couples, and deserves some of the credit that
    is generally given to the bargaining theorists.
  • Now I want to share with you why it bothers me so
    much that contemporary economists often overlook
    Beckers individual models. I am not an objective
    observer here.

10
A variety of Becker models
  • My own exposure to such variety of models
  • As a first-year student at Chicago, in January
    1973, I first got to know Gary Becker as my
    professor in price theory, a course packed with a
    variety of maximization models and aimed at
    getting us to practice his specialty Applying
    calculus to everything. Just identify a utility
    function and some constraints and you are in
    business.
  • Two years later I took his course on the
    economics of the family. It was the first time
    he was teaching it. I was lucky he had an
    interest in preparing such course while he was
    working on his Treatise on the Family, which
    eventually got published in 1981. Again, Becker
    showered us with what seemed like an endless
    stream of optimization models, but this time they
    all addressed issues related to household
    economics.

11
  • Furthermore, given that I wrote my dissertation
    with him, I got to participate in Beckers
    workshop on Applications of Economics in the
    years 1974-1976. Regular participants included
    the Who is Who in economics at Chicago including
    Jim Heckman, T W Schultz, Ed Lazear, George
    Stigler and Richard Posner. Neither Becker nor
    Heckman had yet received their Nobel prizes, and
    Lazear was a beginner level assistant professor.
    Milton Friedman also attended occasionally.
  • We as students got the impression that Becker is
    a virtuoso, a brilliant performer on the academic
    stage, able to produce a variety of
    thought-provoking intellectually stimulating
    models. Like an artist, he had a whole palette of
    models, and he and his students could chose the
    one that adapted best to a given problem. Some
    were unitary, some not. We did not experience
    that there was a unified Becker theory on
    anything. It was my impression that good
    economists can pick and choose their models,
    depending on what works best.

12
More specifically not even a unified theory of
marriage
  • At one of the weekly meetings of the workshop,
    he, Lisa Landes and Bob Michael presented a
    draft of what became their 1977 JPE article on
    divorce. Whether it was on that day or during
    another workshop dealing with marriage, I am not
    sure, but I have clear memories of a big
    discussion about Beckers theory of marriage.
    More precisely, I recall that another one of my
    thesis advisors, Ed Lazear, was critical of
    Beckers matching model of marriage and pointing
    out some of the contradictions between that model
    and what we perceived as Beckers principal model
    of marriage his Demand and Supply model.
  • Another of my thesis advisors was critical of
    Beckers theory of marriage Jim Heckman, who
    had recently arrived from Columbia where he had
    advised Fredericka Pickford Santos, a student
    trained by Becker and Mincer there who wrote her
    dissertation on the economics of marital status
    using a trade model of marriage (see Santos 1975
    cited in Becker 1981). Heckman tried to convince
    me to apply such model to my dissertation on
    polygamy.

13
Intro, cont
  • After considering all the models of marriage
    availableincluding a few Becker models-- and
    hours of heated one-to-one discussions with
    Lazear, Heckman, T.W. Schultz and a number of
    fellow students just as enthusiastic about
    Chicago imperialism as I was, I opted for a
    marriage model that I adapted from labor
    economics that is closely related to Beckers D
    and S model of marriage. In part, I was attracted
    to this model because in his workshop Becker had
    demonstrated that when he engaged in an empirical
    application of his own theoriesin joint work
    with Landes and Michaelhe relied mostly on his
    demand and supply models of marriage. These are
    the models that were most inspiring to students
    writing their dissertations on marriage at the
    time. This applies not only to my own experience,
    but also to the case of Michael Keeley.
  • Likewise, when it comes to models of the family
    in general, including marriage, fertility and
    intergenerational relations, we as students got
    the impression that Beckers models were far from
    unified. Most of them were unitary, but the
    economics of marriage was a central piece of
    Beckers perspective on the family, and a central
    model of his economics of marriage was an
    individualnot a unitarymodel.

14
More general lessons from studying with Becker
  • We also got a clear impression of Beckers
    ideological bent. He presented his work on gender
    specialization in the household and on
    sociobiology. Here he emphasized biological
    differences between male and female. The few
    women amongst us dissociated themselves from
    Beckers ideology on these matters.
  • In historical perspective, after so many years
    went by, I wonder to what degree Beckers
    insistence on biological differences between men
    and women clouded his judgment regarding my own
    theory of marriage.

15
model of allocation of time in labor and marriage
(Grossbard 1984)
  • Utility Function
  • (1) Ui ( li,hi,si, hj, xi,) where U Utility
  • x Commercial goods and services
  • s Time for self, often called leisure.
  • l Labor ( If you go to work)
  • h Household labor
  • i maximizes utility function
  • 2. Three uses of time
  • (2) Ti Si Li hi (explained on next slide)
  • Utility maximization
  • individual i maximizes utility function (1)
    subject to time constraint (2) and Budget
    constraint

16
More on utility function Utility Function Ui (
li,hi,si, hj, xi,)
  • hi and hj contribute to individual Is utility.
  • h is household labor. It is labor in the sense
    that (1) it is an activity that people have to
    put up even though it is not their favorite
    activity (i.e. there is an opty cost) and (2) the
    activity benefits another person/organization who
    is willing and able to compensate the worker.
  • if I is husband and j is wife U i (..hj..) means
    that husband benefits from wifes hh labor. Ex
    wife Doing her husbands laundry. Gender
    symmetric husbands may work for wives
  • si Time for self (Leisure time)
  • hj potential or actual spouse

17
Budget constraintI wili yihi Pixi yjhj
  • LHS income
  • I non-work income ( EX rental income)
  • wwage
  • llabor
  • yihi Earnings from household labor
  • yi quasi-wage for household labor ( It may not
    be monetary or material , could consist of
    psychic, spiritual, emotional benefits)
  • h hours of household labor
  • RHS expenditures
  • Pi Is the price of commercial goods
  • yjhj payment for spouse js household labor it
    is assumed that j gets an hourly rate of yj

18
Different kinds of marriage
  • Traditional marriage yjhj gt yihi , wife works
    more in hh than husband (could be that both
    spouses are in the labor force), where i male
    and j female
  • 2. Egalitarian marriage this is where the value
    of work of yihi and the value of yjhj cancel each
    other out.
  • 3. Reversed-role marriage yjhj lt yihi ,
    husband works more in hh than wife

19
Equilibrium condition
  • MUs y MUhi w MUli
  • MUx MUx MUx
  • MU marginal utility
  • y MUhi/MUx Total compensation and benefits
    per hour of own hh labor
  • MUx MU from x
  • w MUli/MUx total compensation per hour of
    labor in labor market

20
Marriage markets and quasi-wages y
  • These quasi-wages are established in markets.
    Effect of Demand and Supply
  • One basic inference higher opportunity cost of
    LFP if higher y due to more relative demand in
    marriage (see lecture 2)
  • Other basic inference compensating differentials
    (see Grossbard-S and Neuman 1988)

21
In conclusion
  • 1/ Beckers individual models have been
    overlooked, especially in recent years. This is
    related to the false impression that Becker
    himself fostered in his Treatise on the Family
    that his theory of the family is a unified
    framework (see p x Becker 1981). This encouraged
    readers to view the dominant unitary models in
    his book as a unified theory and to overlook the
    individual models that are also covered in the
    Treatise.
  • 2/ Individual models by Becker students are often
    overlooked, including my own. This may be related
    to Beckers attitude towards women.
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