Household models for labor market decisions

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Since Becker's theory of the family (Becker (1981)), the relevance of household-level decisions in impacting labor market outcomes has been clear. Households are institutions for income sharing and for the establishment of strategies to provide consumption and income growth. Moreover, in the context of economic problems, the household labor portfolio can be managed to mobilize additional labor supply among members.

 

Despite the consensus about the relevance of family approaches to address welfare and policy issues, labor market decisions are still treated in most literature at the individual level, often due to theoretical or methodological difficulties. Studies often ignore that most individuals live in households that pool resources and make labor market decisions together. Most studies using household approaches for modeling labor market decisions are focused on strategic behavior and labor market decisions of married individuals.

 

Some papers aim to formulate and test the theoretical restrictions on the labor supply functions of husbands and wives, and other studies are concentrated on bargaining models or collective models of labor supply. More recent literature extends the job search models allowing couples or other members to decide about job search and acceptance.