Intra-household management of resources: evidence from Malawi

I examine assumptions about intra-household resource allocation, using panel from the World Bank’s Living Standards Measurement Study and Climate Hazards Group InfraRed Precipitation with Station data. I test for the complete pooling of household resources after the experience of a transitory shock, accounting for income earned individually by men and women, as well as income earned jointly by multiple household members. I find evidence that food expenditures do not respond to shocks; household members pool resources for this expenditure, even when individuals face substantial shocks to their income. All other expenditures respond to shocks. These findings are robust to inclusion and exclusion of income earned jointly, as well as controlling for household-level unobserved preference heterogeneity. This study extends our understanding of intra-household behavior, beyond standard utility, collective, and non-cooperative conceptions of the household in a panel data context.