The Limitations of the Neoclassical Model of the

The Limitations of the Neoclassical Model of the - The...

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1 The Limitations of the Neoclassical Model of the Family and Alternative Models of Household Decision-Making Limitations of the Neoclassical Model of the Family 1. Predictions for marriage patterns Gains in marriage greater the larger the differences in the relative productivities in market and home production. This has implications for: a. Who should get married b. Changes in marriage and divorce patterns over time.
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2 Marriage patterns not consistent with these predictions Percent Married, Ages 15 + 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 1950 1960 1970 1980 1990 2000 2010 Men Women
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3 Percent Divorced, Ages 15 + 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 1950 1960 1970 1980 1990 2000 2010 Men Women Limitations of the Neoclassical Model of the Family 2. Disadvantages of Specialization
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4 Limitations of the Neoclassical Model of the Family 3. Assumption that can represent family preferences by a single utility function Spouses have “individual” preferences before they get married; those preferences may conflict. => How do they resolve those conflicts? So back to the original two questions: 1. Why do people form households? 2. How do households make decisions?
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5 What are the economic gains to household formation? How do households make decisions? Most of the alternative models of household decision-making are “Bargaining Models” => Household members “bargain” over how to divide family resources
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6 Bargaining Models Basic concept: Some “pie” to be divided by two parties. Division depends on relative bargaining positions of the parties. “Stronger” party will get larger share of the pie. Bargaining Models
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The Limitations of the Neoclassical Model of the - The...

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