Publications [#215652] of V. Joseph Hotz

Working Papers

1. M. Dalton, V. J. Hotz, D. Thomas, Resources, Composition and Family Decision-Making (January, 2013)
   (last updated on 2013/02/10)

   Abstract:
   This paper examines the role of family members in resource allocation decisions, taking into account the distribution of resources, demographic composition and living arrangements and location choices of spatially dispersed families. We explore resource allocations by families in an effort to shed light on the extent to which non co-resident family members, i.e., extended families, are connected through such allocations. We test whether fluctuations in resources in one household within an extended family are fully insured by access to resources in other households within that same family. We find insurance is incomplete in this setting, a result that is consistent with Altonji, Hayashi and Kotlikoff (1992) as well as a large literature on decision-making within households. Of central interest in this research is an exploration of whether non co-resident family members behave as a collective in the sense that allocations can be treated as if they are Pareto efficient That model also is rejected. The paper then investigates whether there are systematic patterns underlying these departures from efficiency. Highlighting decisions revolving around large, lumpy expenditures, we find that the departures from efficiency appear to be related, on the one hand, to spending on education by families with college-aged children and non co-resident grandparents, and, on the other hand, to spending on housing among younger, childless couples and their parents. This evidence suggests new avenues for empirical tests of models of family behavior and investment in human and physical capital.