Evidence From Fathers” Child Support Payments On The Impact Of Partners” Relative Incomes On Bargaining Power Within Households

The balance of power in household decision-making depends on the relative incomes of the two partners, according to new research by Professor John Ermisch and Chiara Pronzato published in the March 2008 issue of The Economic Journal.

Their study examines child support payments made by divorced fathers in Britain who have formed new partnerships, and finds that the size of the payments increases with the share of the father’s income relative to his new partner.

As the new partner presumably cares little about the welfare of children from the previous relationship, this implies that the higher the income of the father relative to the new partner (holding household income constant), the more power the father has in household decisions.

The authors comment:

”We find that fathers who contribute a higher proportion of household income are more likely to pay child support and to pay higher amounts. This is consistent with partners’ relative incomes affecting their bargaining power in household decisions.”

In Britain, nearly two-thirds (65%) of children born into a cohabiting union and almost a third (30%) of children born within a marriage will experience dissolution of their parent”s union before they are 16. So maintenance payments are a fact of life for many divorced parents across the country.

This is useful for assessing the relative power within couples, as the only way to assess whether relative incomes have an effect is to find a good that is only valued and consumed by one partner.

For example, suppose only the woman drinks wine. If, holding household income constant, wine consumption increases when she contributes more to household income, then it is likely that her bargaining power in household decisions has increased. In this case, who in the household receives cash transfers, like family allowances, would affect the household”s consumption patterns and the distribution of welfare in the family.

But data on whether it is only the woman who drinks wine do not exist. Other, gender-specific spending is no more helpful. While women enjoy buying clothes for themselves, for example, there is no way of telling how much their partners enjoy seeing them in their new clothes.

This study uses information about child support payments by formerly married fathers who have dependent children living elsewhere and who have formed new partnerships. Of course, only voluntary maintenance payments matter – if the father has to pay his ex-wife maintenance, then the new partner cannot alter that. But in a national survey by the Office for National Statistics, over half (56%) of maintenance payments were voluntary. And most of the rest are poorly enforced, so in effect they are voluntary.

The authors use data from the British Household Panel Survey, a nationally representative sample, which tracks 5,500 families every year since 1991. From these data, the authors identify men who had a child within a partnership and for whom that partnership subsequently dissolved. From annual observations of these men after the couple separated, they calculate how long they have a dependent child (aged under 16) not living with them and have a new partner.

The authors conclude:

”While the households we look at are not typical, there is no strong reason to believe that the role of relative incomes in decision-making is distinctly different from other households containing a married or cohabiting couple.”

”Intra-Household Allocation of Resources: Inferences from Non-resident Fathers” Child Support Payments” by John Ermisch and Chiara Pronzato is published in the March 2008 issue of The Economic Journal.

Chiara Pronzato

Institute of Social and Economic Research at the University of Essex | 01206 873760 | cdpron@essex.ac.uk

John Ermisch

Institute of Social and Economic Research at the University of Essex | ermij@essex.ac.uk