Economic models of family decision-making, with applications to intergenerational justice. (original) (raw)

Woolley, Frances Ruth(1990)Economic models of family decision-making, with applications to intergenerational justice. PhD thesis, London School of Economics and Political Science.

Abstract

The thesis considers economic models of family decision-making, and their application to intergenerational justice. The predictions of several previous "cooperative" models of family decision-making depend crucially on the outcome of failure of spouses to cooperate. The first part of the thesis develops a model which predicts behaviour of caring spouses who fail to cooperate. The model has three distinctive features. First, caring between spouses is modelled using sympathy preferences. Second, transfers between spouses are made in income. Third, the interdependence between family members is resolved in two ways; first, assuming that family members have Cournot-Nash conjectures, that is, they maximize their own well-being taking the other family member's behaviour as given and, second, assuming that family members have rational conjectures. The model predicts how the division of income between spouses influences the outcome of family decision-making. When each spouse has enough income to pay for his or her personal expenditures, expenditures are determined by the interaction of both spouses' preferences. When one spouse is poor enough that she receives an income transfer from the other spouse, expenditures reflect the preferences of the wealthier spouse. The second part of the thesis uses the model to analyze the tax treatment of the family. When spouses' incomes are comparatively equal, or when one spouse is dependent on the other, small government imposed transfers are irrelevant. However, if one spouse earns just enough to pay for her private consumption, income transfers between spouses have effects on social welfare. The final part of the thesis considers intergenerational altruism in the "original position" described in Rawls' Theory of Justice. Intergenerational altruism is crucial to Rawls' account of justice between generations. It is argued that, given the nature of the choice problem, and concern for descendants strong enough to generate positive bequests, Rawls' intuition that intergenerational altruism guarantees intergenerational justice is correct. However, if each child has two concerned parents, and the conditions for intergenerational justice to hold are satisfied, small redistributions of income are irrelevant. This result leads to a re-examination of the intergenerational justice conditions and the background institutions for distributive justice.

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