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ABSTRACT
Common preference models offamily 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 n the 1970s, a proposed change in social welfare policy in the United Kingdom excited considerable debate. The universal child allowance, which had consisted primarily of a reduction in the amount withheld for taxes from the father's paycheck, was to be replaced by a cash payment to the mother. An excerpt from the parliamentary debate in the House of Commons Hansard (May 13, 1975) expresses a popular sentiment: "[F]ar from a new deal for families, it will take money out of the husband's pocket on the Friday and put it into the wife's purse on the following Tuesday. Far from being a child benefit scheme, it looks like being a father disbenefit scheme." Popular discussions of family policies such as the U.K. child benefit often concern their presumed effects on distribution within the family-on the relative well-being of husbands, wives and children. The economist armed only with traditional models of the family must view these discussions as naive. Until very recently, the standard of the profession for both theoretical and empirical analysis was a "common preference" model of the family, which assumes that family members act as though they are maximizing a single utility function. A family's common preference ordering may be the outcome of consensus among family members or the dominance of a single family member, but all such models imply that family expenditures are independent of which individuals in the family receive income or control resources. Common preference models imply that all income is "pooled" and then allocated to maximize a single objective function, so that family demand behavior depends on total family income and not the incomes of individual members.
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