TESTING ECONOMIC MODELS OF HOUSEHOLD RESOURCE ALLOCATION

Abstract

This dissertation examines the role of household resource allocation on individual human capital accumulation. The main contributions of the dissertation is providing evidence first that families play an active role on individual investment and second that cost and benefit within the household are not shared evenly among members. First, using multiple births as an exogenous shift in family size, I investigate the impact of the number of children on child investment and child well-being. Using data from the 1980 US Census Five-Percent Public Use Micro Sample, 2SLS results demonstrate that parents facing a change in family size reallocate resources in a way consistent with Becker's Quantity and Quality model. A larger family generated by a twin on a later birth reduces the likelihood that older children attend private school, increases the likelihood that children share a bedroom, reduces the mother's labor force participation, and increases the likelihood that parents divorce. The impact of family size on measures of child wellbeing, such as educational attainment, the probability of not dropping out of school and teen pregnancy is, however, less clear. The results do indicate that for both measures of child investment and child well being, the 2SLS estimates are statistically distinguishable from OLS estimates indicating an omitted variables bias in the single equation model. Second, using data from the National Health Interview (NHIS) and Behavioral Risk Factor Surveillance System (BRFSS), I examine the effect of female employment and predictors of obesity for married men and women. I use the fact that there is a clear relationship between female labor force participation (FLFP) and age structure of children in the household in order to identify the impact of FLFP. When children are small mothers tend to stay at home; later when children start kinder garden or school mothers are able to come back to paid activities. I find that for married men with less than high school, female employment raises their Body Mass Index (BMI). However I do not find evidence that female employment increases women's BMI or the likelihood of obesity.