Consumption and the Within-Household Income Distribution: Outcomes from an Australian 'Natural Experiment'

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Abstract
Does the within-household distribution of income influence household consumption patterns, and children’s consumption in particular? This question is not easy to answer because it is difficult to distinguish variations in consumption determined by the within-household income distribution, from those determined by factors such as wage rates and preferences. In one attempt to decide this question, Lundberg, Pollak and Wales (1997) exploited the ‘natural experiment’ of a change in the payment mechanisms for family benefits in the UK. They found that the within-household income distribution did have a significant impact on expenditure on men’s, women’s and children’s clothing. This paper exploits a similar natural experiment in Australia. During the 1990s, income support for unemployed married couples was changed from being paid almost entirely to husbands, to being paid primarily to wives. The impact of this change is examined using data from household expenditure surveys conducted before, during and after these policy changes. It is found that, although the changes in the within-household income distribution were large, the changes in expenditure patterns were small and not in the expected direction. The data do not, therefore, provide support for the hypothesis that women’s control over household expenditures increased.
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Bradbury, Bruce
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2003
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Working Paper
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