Economic and Social Status in Household Decision Making: Evidence from Extended Family Mobility

Abstract

Models of the allocation of household resources use as a decision rule either the maximization of a household utility function (Becker, 1984) or the solution to a Nash-bargaining game (McElroy and Horney, 1981). To date the mobility literature has exclusively utilized the former approach to analyze the household's decision to change location. This is despite the strong empirical evidence that allocations in other areas are more consistent with the bargaining model. In this paper we use micro-data from Taipei, Taiwan to determine which approach is most appropriate for studying housing mobility decisions. We compare the mobility decisions of nuclear and different types of extended family households to test whether the social and economic roles of different generations affect the household decision process, as is consistent with the bargaining approach. In doing so, we analyze household mobility with a richer description of household structure than is found in the current literature, which implicitly treats households as either a nuclear family or some smaller unit. Our results support the bargaining model of household decision making. Conditional probabilities differ between nuclear and extended families, when a member of the eldest generation in an extended household is the household head, and when a member of the eldest generation contributes to household earnings.

JEL Classification: D1, J1, R2