FINANCIAL MANAGEMENT, BARGAINING AND EFFICIENCY WITHIN THE HOUSEHOLD - AN EMPIRICAL-ANALYSIS

This paper analyzes data from the British Household Panel Survey on ho useholds' financial management and financial decision-making. Direct s ubjective information was collected by asking questions like 'Who has the final say in big financial decisions?'. All questions were answere d separately by both partners. We consider two competing models explai ning how finances are organized. The first model is based on a househo ld production approach, in which behaviour is determined by an efficie nt allocation of both partners' time to market work, financial managem ent, and leisure. In the second model, which is game-theoretic in natu re, financial management is a reflection of bargaining power. The two models have different implications for the effect of explanatory varia bles, in particular wages, on the dependent variables. Empirical resul ts indicate that financial management is primarily determined by barga ining considerations.