BARGAINING AND INTRAHOUSEHOLD RESOURCE ALLOCATION: AN ANALYSIS OF THE ...

211 Pages·2003·1.55 MB·English

The Pennsylvania State University

The Graduate School

College of Agricultural Sciences

BARGAINING AND INTRAHOUSEHOLD RESOURCE ALLOCATION: AN
ANALYSIS OF THE IMPACT OF CREDIT AND LAND IN MALAWI

A Thesis in

Agricultural Economics

by

Hema Swaminathan

© 2003 Hema Swaminathan

Submitted in Partial Fulfillment
of the Requirements
for the Degree of

Doctor of Philosophy

May 2003
We approve the thesis of Hema Swaminathan

Date of Signature

______________________________________________ ______________
Jill. L. Findeis
Professor of Agricultural, Environmental and
Regional Economics and Demography
Thesis Advisor
Chair of Committee

______________________________________________ ______________
David. G. Abler
Professor of Agricultural, Environmental and
Regional Economics and Demography

______________________________________________ ______________
Carolyn E. Sachs
Professor of Rural Sociology and Women’s Studies

______________________________________________ ______________
David Shapiro
Professor of Economics, Demography and
Women’s Studies

______________________________________________ ______________
David Blandford
Professor of Agricultural Economics
Head of Department of Agricultural Economics and
Rural Sociology
ABSTRACT

In recent years, the focus in the study of household behavior has shifted from the
household as a homogeneous unit (unitary model) to the different individuals comprising
the household (collective model). There are several issues (such as preferences
heterogeneity among household members, differential control of resources) that the
unitary approach cannot address. The more general models of household decision-
making explicitly recognize and model the individualistic elements in the household
within a collective framework. Collective models make the assumption of Pareto
efficiency in intrahousehold distribution but do not impose a particular solution concept.
The concept of bargaining power plays a crucial role in the collective model. The model
predicts that the household allocation process and the resultant outcomes will reflect the
bargaining power of the individual. Individuals derive bargaining power from multiple
sources, many of which correspond to the alternative options available to them in the
event of withdrawing from the agreement.
The research undertaken in this dissertation focuses on two aspects of household
decision making, labor allocation and consumption expenditures, using the framework of
the Nash-bargaining model and the agricultural household model. The measures of
bargaining power used are access to credit and ownership of land. In this study a
distinction is made between access to credit and participation in the credit market. The
analyses in this research are based on the data set ‘Financial Markets and Household
Food Security, 1995’, which was made available from the International Food Policy
Research Institute (IFPRI), Washington D.C. The data are from a household survey of
404 households in 45 villages spread over five districts in rural Malawi.
The estimation procedure undertaken in this dissertation follows a two-step
approach to correct for choice-based sampling of the survey. In the first step, the
probability choices regarding credit program membership status for the household are
estimated using the weighted–exogenous–maximum likelihood multinomial logit model.
The empirical models estimated in the second step include models to estimate the impact
of access to credit on work choices and models to estimate the impact of access to credit
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and land ownership on consumption decisions within the household. The credit–labor
allocation models are analyzed using the random-effects probit model, corrected for
endogeneity of access to credit to the labor allocation decision. The effect of access to
credit and land ownership on household expenditure shares are analyzed using ordinary
least squares and Tobit models, corrected for endogeneity of total household expenditure.
The credit–labor allocation models indicate that access to formal as well as
informal credit increases participation in off-farm self-employment activities, and reduces
participation in own farm work for women in male-headed households. Access to
informal credit increases men’s participation in off-farm self-employment activities.
Women’s access to formal credit also reduces men’s participation in own farm work.
Education in rural Malawi appears to be a differentiating characteristic between those
working off-farm and those allocating time to farm work. More education among men in
Malawi encourages their participation in off-farm self-employment, whereas those men
with less education are concentrated on farms. However, this relation does not appear to
be true where women are concerned suggesting they are engaging in low-skill self-
employment activities. Locational characteristics were found to be important in
explaining participation in self-employment activity.
The results from the expenditure models do not unequivocally support the
hypothesis that men spend more on items of personal consumption while women are
more oriented towards children and household welfare. While women in Malawi do
seem to spend more on general household items, health and education, men in Malawi are
also spending less on adult goods when they have access to formal credit. Female heads,
on the other hand, increase the share of household expenditure on adult goods with access
to formal credit. Expenditures on health increase in all the models except for female
heads’ access to informal credit, suggesting the importance of health care. Child-related
investments are negatively affected by female head’s access to informal credit and
women’s (spouses’) share of land. Combined with the results from other equations in the
models, it suggests that child-related investments are not yet a ‘priority’ area for the
household.

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TABLE OF CONTENTS

List of Tables.............................................................................................................vii

Acknowledgements....................................................................................................xii

Chapter 1. INTRODUCTION................................................................................... 1

1.1 Research Background..................................................................................... 1
1.2 Research Statement and Motivation............................................................... 2
1.3 Research Objectives........................................................................................ 5
1.4 Organization of the Dissertation..................................................................... 6

Chapter 2. LITERATURE REVIEW........................................................................ 8

2.1 Models of Household Behavior and Resource Allocation.............................. 8
2.2 Unitary Models............................................................................................... 8
2.3 Collective Models...........................................................................................10
2.3.1 Cooperative Bargaining Models........................................................13
2.3.2 Noncooperative Bargaining Models..................................................16
2.3.3 Significance of the Collective Models...............................................17
2.4 Empirical Studies.............................................................................................19

Chapter 3. THEORETICAL FRAMEWORK..........................................................26

3.1 The Household Model.....................................................................................26
3.1.1 When to Use a Household Model......................................................28
3.2 Theoretical Model...........................................................................................29
3.2.1 Labor Allocation Decisions...............................................................29
3.2.2 Comparing the Nash and the Unitary Models....................................33
3.2.3 Comparative Statics in the Nash Model.............................................36

Chapter 4. DATA AND SAMPLING.......................................................................40

4.1 Country of Study: Malawi..............................................................................40
4.1.1 The Agricultural Economy................................................................41
4.2 Sampling Procedure and Data Characteristics................................................42
4.2.1 Research Trip to Malawi, March 2001..............................................45
4.2.2 Data Characteristics...........................................................................46
4.3 A Discussion of Descriptive Statistics............................................................52

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Chapter 5. CREDIT AND LABOR ALLOCATION...............................................62

5.1 Introduction.....................................................................................................62
5.2 Access to Credit..............................................................................................65
5.3 Empirical Framework.....................................................................................67
5.3.1 Sampling Framework: Choice-Based Sampling...............................67
5.3.2 Second-step Estimation: Credit and Labor Allocation.....................74
5.3.3 Access to Credit: Identifying Variables............................................82
5.4 Results.............................................................................................................83
5.4.1 Descriptive Statistics..........................................................................83
5.4.2 Econometric Analysis........................................................................91
5.6 Concluding Remarks.......................................................................................101

Chapter 6. HOUSEHOLD EXPENDITURE PATTERNS: IMPACT OF
CREDIT AND LAND.............................................................................................107

6.1 Introduction.....................................................................................................107
6.1.1 Access to Credit.................................................................................107
6.1.2 Land Ownership.................................................................................108
6.2 Empirical Framework.....................................................................................110
6.2.1 Some Econometric Issues..................................................................112
6.3 Results.............................................................................................................114
6.3.1 Descriptive Statistics..........................................................................114
6.3.2 Econometric Analysis........................................................................120
6.4 Concluding Remarks.......................................................................................141

Chapter 7. CONCLUSIONS.....................................................................................149

7.1 Introduction.....................................................................................................149
7.2 Discussion.......................................................................................................151
7.3 Limitations of the Study..................................................................................157
7.4 Future Research..............................................................................................158

BIBLIOGRAPHY......................................................................................................160

Appendix A. Credit Received–Labor Allocation Models.........................................171

Appendix B. Access to Credit–Labor Allocation Models
(Cross-section Approach)........................................................................................178

Appendix C. Credit Received–Expenditure Share Models.......................................184
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LIST OF TABLES

Table 3.1 Optimal consumption in the Nash and Unitary models..........................36

Table 4.1 Main types of data included in selected modules of the DRD/IFPRI
Malawi data set, 1995.............................................................................48

Table 4.2 Selected characteristics of the sample at the area/district level,
DRD/IFPRI Malawi data set, 1995.........................................................51

Table 4.3 Demographic characteristics of sample households in rural Malawi,
DRD/IFPRI survey..................................................................................54

Table 4.4 Asset ownership, composition and distribution by headship status
of the household......................................................................................56

Table 4.5 Access to credit by sector of credit market and household type.............57

Table 4.6 Credit received by sector of credit market and household type..............59

Table 4.7 Use of credit received by sector of credit market and household type...61

Table 5.1 Means and standard deviations of variables used in the multinomial
logit model..............................................................................................71

Table 5.2 Results of the multinomial logit model for predicting probability
choices for the household, corrected for choice-based sampling
(weighted-exogenous-sample maximum likelihood estimates).............72

Table 5.3 Rivers and Vuong test for endogeneity based on Round 1 of
DRD/IFPRI Rural Finance Survey........................................................80

Table 5.4a Participation in off-farm self-employment and farm work, Round 1....85

Table 5.4b Participation in off-farm self-employment and farm work, by
round of survey......................................................................................86

Table 5.5 Characteristics of off-farm self-employment enterprises......................89

Table 5.6a Selected responses to the question of why business has increased
your status in the family.........................................................................90

Table 5.6b Selected responses to the question of why business has increased
your status in the village........................................................................90

Table 5.7 Means and standard deviations of variables used in the panel models..95
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Table 5.8 Women's participation in off-farm work and access to credit:
two-step random-effects probit estimates corrected for
endogeneity............................................................................................97

Table 5.9 Female head's participation in off-farm self-employed work, and
access to credit: two-step random-effects probit estimates
corrected for endogeneity......................................................................98

Table 5.10 Men's participation in off-farm work and access to credit:
two-step random-effects probit estimates corrected for
endogeneity...........................................................................................99

Table 5.11 Women's participation in own-farm work and access to credit:
bivariate probit estimates corrected for endogeneity...........................104

Table 5.12 Female head's participation in own-farm work and access to credit:
bivariate probit estimates corrected for endogeneity............................105

Table 5.13 Men's participation in own-farm work and access to credit:
two-step random-effects probit estimates corrected for
endogeneity...........................................................................................106

Table 6.1a Summary statistics of expenditure shares, rounds one to three
by household type, credit-expenditure model.......................................116

Table 6.1b Summary statistics of expenditure shares, rounds one to three
by household type, land ownership-expenditure model.......................117

Table 6.2a Land ownership and distribution in male-headed households
by region...............................................................................................118

Table 6.2b Land ownership and distribution in male-headed households
by household landholding.....................................................................119

Table 6.3 Means and standard deviations of variables used in the
credit-expenditure models......................................................................124

Table 6.4 Household expenditure shares and access to formal credit in
male-headed households: 2SLS and Tobit estimates.............................126

Table 6.4.1 Household expenditure shares on food (produced at home and
purchased) and access to formal credit in male-headed
households: 2SLS estimates...................................................................128

Table 6.5 Household expenditure shares and access to formal credit in
female-headed households: OLS and Tobit estimates...........................129
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Table 6.5.1 Household expenditure shares on food (produced at home and
purchased) and access to formal credit in female-headed
households: OLS estimates....................................................................131

Table 6.6 Household expenditure shares and access to informal credit in
male-headed households: 2SLS and Tobit estimates.............................132

Table 6.6.1 Household expenditure shares on food (produced at home and
purchased) and access to informal credit in male-headed
households: 2SLS estimates...................................................................134

Table 6.7 Household expenditure shares and access to informal credit in
female-headed households: OLS and Tobit estimates...........................135

Table 6.7.1 Household expenditure shares on food (produced at home and
purchased) and access to informal credit in female-headed
households: OLS estimates....................................................................137

Table 6.8 Household expenditure shares and access to formal credit:
check of functional form........................................................................138

Table 6.9 Household expenditure shares and access to informal credit:
check of functional form........................................................................139

Table 6.10 Means and standard deviations of variables used in the
land ownership - expenditure models....................................................143

Table 6.11 Household expenditure shares and share of land owned by
women in male-headed households: 2SLS and Tobit estimates............145

Table 6.11.1 Household expenditure shares on food (produced at home and
purchased) and share of land owned by women in male-headed
households: 2SLS estimates..................................................................147

Table 6.12 Household expenditure shares and share of land owned by
women: check of functional form..........................................................148

Table A.1 Women's participation in off-farm work and receipt of
credit: two-step random-effects probit estimates corrected
for endogeneity......................................................................................172

Table A.2 Female head's participation in off-farm self-employed work,
and receipt of credit: two-step random-effects probit estimates
corrected for endogeneity......................................................................173

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Table A.3 Men's participation in off-farm work and receipt of credit:
two-step random-effects probit estimates corrected for endogeneity....174

Table A.4 Women's participation in own-farm work and receipt of credit:
bivariate probit estimates corrected for endogeneity.............................175

Table A.5 Female head's participation in own-farm work and receipt of
credit: bivariate probit estimates corrected for endogeneity..................176

Table A.6 Men's participation in own-farm work and receipt of credit:
two-step random-effects probit estimates corrected for endogeneity....177

Table B.1 Participation in off-farm self-employed work and access to
credit: endogeneity-corrected probit estimates for women
in male-headed households....................................................................179

Table B.2 Participation in off-farm self-employed work, and access to
credit: endogeneity-corrected probit estimates for female heads..........180

Table B.3 Participation in off-farm self-employed work and access to
credit: endogeneity-corrected probit estimates for men.........................181

Table B.4 Participation in own-farm work and access to credit:
endogeneity-corrected probit estimates for women in
male-headed households........................................................................182

Table B.5 Participation in own-farm work and access to credit:
endogeneity-corrected probit estimates for men....................................183

Table C.1 Household expenditure shares and formal credit received
in male-headed households: 2SLS and Tobit estimates.........................185

Table C.1.1 Household expenditure shares on food (produced at home
and purchased) and formal credit received in male-headed
households: 2SLS estimates...................................................................187

Table C.2 Household expenditure shares and formal credit received
in female-headed households: OLS and Tobit estimates.......................188

Table C.2.1 Household expenditure shares on food (produced at home
and purchased) and formal credit received in female-headed
households: 2SLS estimates...................................................................190

Table C.3 Household expenditure shares and informal credit received
in male-headed households: 2SLS and Tobit estimates.........................191

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