Efficiency in Intrahousehold Resource Allocation

This paper examines the allocation of productive resources within the rural households of poor countries. Building upon the existing literature, it provides a consistent framework with which to study production efficiency and intrahousehold equity.

General Characteristics of Developing-Country Households
Much of the economic literature on intrahousehold issues focuses on the distribution of consumption among household members. Production decisions are often ignored. Moreover, gender issues receive almost exclusive emphasis; intergenerational issues receive scant attention. Such an approach may suffice for developed countries, where small nuclear households dominate, most people work for wages, children go to school and leave their parents afterwards, and less time is devoted to household chores. But family structure in the Third World especially its rural areas, is more complex. There, households are large and occasionally encompass several couples and their children. Household members are engaged in a multiplicity of income-generating activities, both on their own and in collaboration with others. Self-employment is the rule. Household chores are many and time-consuming and they fall overwhelmingly on the shoulders of women. Children are numerous and spend less time in school and more time helping around the house or the farm. It is customary for young adult males to remain on their father's farm until they are allowed to marry—and often to stay after marriage in the case of vertically integrated households. A proper understanding of the functioning of Third World households requires a conceptual framework tailored to their characteristics.

Factors Influencing Intrahousehold Efficiency
Third World societies have evolved detailed laws and customs governing the transfer and use of productive resources such as land, capital, and farm inputs, and assigning specific tasks and roles to household members according to their status. These rules restrict individual choice and impose financial and work obligations so that members contribute to the joint welfare of the household. Financial independence is usually granted in exchange for assuming specific responsibilities.

In many Sahelian villages, for instance, the head of the household manages the main cereal fields and disposes of the output, and also is responsible for feeding the family. Married wives often are granted small plots that they cultivate on their own, but they must provide the vegetables and condiments that complement family meals. Unmarried sons may earn pocket money by cultivating their own field, but they must first work on the household's main fields. Tension between household members therefore results regarding the allocation of labor among competing income-generating activities with distinct claimants. Some researchers suspect that tension over labor allocation may even be the source of economic inefficiency. Gender inequality in the acquisition of schooling, experience, and skills that open the door to wage employment is also widespread, together with the possibility that male heads of households collude to exclude women or young adults from remunerative activities. Domestic violence and social stigma are cited as additional pressure that heads of households may bring to bear on recalcitrant members.

To explore these issues in detail, a simple model of intra- household labor allocation is constructed. Simple conditions for an efficient allocation of labor and other productive resources are derived. The con-ditions under which

The analysis shows that age and gender casting is overly restrictive and unlikely to provide sufficient opportunities for individuals to express their talent.

commitment failure arise, that is, when household members are unable to precommit their future actions and hence find it difficult to enforce intrahousehold agreements, are then explored. The interaction between household members when public goods such as housing or children are introduced into the model are also investigated.

Study Results
The framework presented here suggests avenues for testing the efficiency of resource allocation within the household and the possible role of commitment failure in preventing the achievement of full efficiency. Some work has been done on measuring the extent of allocative inefficiency. But little attempt has been made to understand the reasons for the observed inefficiency. The model presented here proposes one avenue—commitment failure—through which inefficiency in intrahousehold resource allocation may arise and it makes the following testable empirical predictions. In the presence of commitment failure, women and other dependents apply more labor to their farm and business than is efficient. The head of household attempts to resolve commitment problems by allocating individual plots and other productive resources on a discretionary basis. Household members with fewer productive assets under their control end up producing most of the household's public goods. Inefficiency is fostered by factors that exacerbate commitment failure, such as short time horizons (sons and daughters who expect to leave the household; dysfunctional families), low asset levels (low gains from intrahousehold exchange), unequal stakes in the household (some members have low welfare gains from household participation), and poor external enforcement. Finally, the framework here predicts that the allocation of consumption and leisure reflects individuals' utility from staying in the household versus leaving it. It therefore provides the basis for testing the effects of the determinants of exit options on intrahousehold allocation of leisure and nutrition. Providing empirical verification for these predictions is the object of future research.

The analysis shows that intrahousehold productive inefficiency should not arise unless household members are prevented from entering into enforceable side contracts. Patrimonial laws and customs regarding inheritance and divorce can be understood as efforts to mitigate commitment failure within the household. The study notes that, depending on returns to scale, specialization and experience, efficiency may require the centralization of production and the specialization of individual household members in certain tasks and activities. In this context, age and gender casting can be understood as an institution meant to resolve the allocation of tasks among household members. The analysis also shows that age and gender casting is overly restrictive and unlikely to provide sufficient opportunities for individuals to express their talent. In other words, by attempting to fix one possible source of inefficiency—intrahousehold task allocation—age and gender casting introduce another, namely, the misallocation of innate talent among specialized economic activities. The welfare loss from a mismatch of talents is probably low in unspecialized, undifferentiated societies such as poor rural areas of the Third World, but it is likely to be high in highly diversified, rapidly evolving societies. Consequently, age and gender casting should become increasingly costly and ill-adapted as societies become more differentiated, and therefore progressively repealed as development takes place. More work is needed on this issue.

The study also demonstrates that the provision of nonexclusive household public goods opens the door to strategic interaction between household members. The resulting strategic inefficiency could be resolved, provided credible commitments are feasible.

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