Research

[Previously titled "Actors in the Child Development Process'"]

We construct a dynamic model of child development where forward-looking parents and children jointly take actions to increase the child’s cognitive and non-cognitive skills within a Markov Perfect Equilibrium framework. In addition to time and money investments in their child, parents also choose whether to use explicit incentives to increase the child’s self-investment, which may reduce the child’s future intrinsic motivation to invest by reducing the child’s discount factor. We use the estimated model parameters to show that the use of extrinsic motivation has large costs in terms of the child’s future incentives to invest in themselves. 

We consider an infinitely repeated legislative bargaining model with a dynamically evolving status quo. Three players, one of whom is permanently endowed with veto power, must split a fixed budget in each period. Despite her additional power, the veto player cannot always asymptotically extract the full surplus. The non-veto players endogenously prevent each other’s expropriation when they are patient and have high initial allocations in the unique stationary, symmetric, stage-undominated, coalition-proof Markov perfect equilibrium. Further, we show that veto power and higher recognition probability may be strategic substitutes rather than complements. We also provide an intuition behind selfish egalitarianism between non-veto players. Our technique of employing coalition-proofness and iteratively generating a new equilibrium with novel predictions sheds light on the divergence in recent literature on the value of veto power and may be useful in other environments.

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within a particular household under study.

We provide a revealed preference analysis of the “habits as durables” model. This approach avoids the need to impose a functional form on the underlying utility function. We show that our characterization is testable by means of linear programming methods, and we demonstrate its practical usefulness by means of an application to cigarette consumption using a Spanish household consumption data set. We find that the “habits as durables” model has better empirical fit in terms of predictive success compared to the “short memory habits” and life cycle models. 

This chapter contains a state of the art of revealed preference tests for consistency of observed household behavior with Pareto efficiency. These tests are entirely nonparametric, since they do not require any assumptions regarding the parametric form of individual preferences or the intrahousehold bargaining process. We start with a discussion of some tests that are based on Chiappori's (Econometrica, 1988) seminal labor supply model with egoistic preferences and observed individual leisure. We then present revealed preference conditions for Browning and Chiappori's (Econometrica, 1998) collective consumption model with general individual preferences (including public goods and externalities) and only aggregate household consumption observed. Finally, we deal with a test for special cases of the general model, one that is based on integer programming.

I study the dynamic relationship between parental labor supply, children's cognitive development and intra-household bargaining, by constructing a cooperative household model with endogenous outside options and limited commitment. The model incorporates rich preference heterogeneity, dynamic human capital accumulation for children and parents, endogenous wages, formal childcare, and periodic intra-household renegotiation. I use the estimated model to show that a budget-neutral modification of the 2023 Child Tax Credit could finance a generous childcare subsidy with limited or no work requirements, inducing substantial increases in female labor supply, persistent gains in child cognition and female bargaining power, and lower intra-household welfare inequality.

We leverage a model of parental and child investments in the cognitive and non-cognitive development of children, to explore the impact of various government income transfer policies. We consider both unconditional and conditional cash or goods transfers, with the recipient being either the parents or the child. In line with prior research, we find that if the planner's objective is to improve the distribution of children's cognitive skills, the most effective set of policies are conditional cash transfers (CCTs), in which the household receives an income transfer only when the child's cognitive ability exceeds a prespecified threshold. However, we show that while CCTs foster cognitive skills in the short run, these monetary incentives also create non-trivial negative feedback effects on children's intrinsic motivation levels, as proxied by their intertemporal discount factors. We show that if the planner's objective is to overall child (or parental) welfare, unconditional cash or goods transfers may be optimal.