Teenage girls in the UK typically play an active role in family decisions about the allocation of household resources. But older children (those over the age of 21) still living with their parents appear to have no say over household decisions. These are among the findings of a study by Professor Bernard Fortin and colleagues, published in the June 2011 issue of the Economic Journal.
Analysing data from the UK''s Family Expenditure Survey, the research finds strong evidence that teenagers have an important influence on household consumption patterns. This is important to understand – not just for marketers but also for policy-makers considering the likely impact of measures that target specific individuals (such as the minimum wage, the school leaving age and subsidised education) and needing to anticipate the response of both recipients and non-recipients.
Most people suspect that children have the power to affect the household decision process, especially when they become teenagers – and marketers are betting on this. But how can we confirm that this really is the case – and, if so, what are the consequences for intra-household economic decisions and the impact of policy?
To determine whether children have any kind of influence, one could test whether the presence of a teenager living with her parents affects the composition of household expenditures – for example, on leisure goods, recreational goods, clothing and education. Of course, the problem here is that even when an adolescent has no bargaining power whatsoever, her very presence may influence her parents'' consumption decisions if they care for her.
The researchers tackle this problem by using variables that are likely to affect the child''s bargaining power and determine whether they influence the composition of household consumption goods in her favour.
The teenager''s bargaining power itself is assumed to depend largely on the wellbeing she would obtain were she to leave the family nest. So any variable that affects her dependence on her parents – such as her contribution to the total household income, rental rates and school fees – is likely to affect her bargaining power.
This is precisely what the researchers do. Among other things, they proxy children''s bargaining power with their share of total household income. The findings show conclusively that teenage girls living at home take an active role in the household allocation of resources.
The evidence for boys is much less conclusive. And while any children in the household aged 21 and under also have strong bargaining power, older children still living with their parents appear to have no say over household decisions.
Given these findings, what are the likely consequences of conceiving family decisions as the result of a process involving parents only, when they truly stem from a process that also involves children?
First, it might lead policy-makers to favour inadequate policies when addressing important economic issues such as investment in post-secondary education, child labour and food allocation within poor households in developing countries.
Second, it might lead to incorrect intra-household welfare analysis. Consider, for example, an increase in the minimum wage. If adolescents are not treated as decision-makers, standard analysis would predict the change to have no intra-household welfare effect if both parents earn a higher wage and the adolescent is not working.
Conversely, if adolescents do take part in the decision process, the same policy change might increase their bargaining power, even if they are not working, and thus have intra-household welfare effects.
In fact, any social policy that is conditional on a particular living arrangement is likely to have welfare effects. Taking into account the number of decision-makers in a household and anticipating the response of recipients and non-recipients alike is very important for any policy that targets specific individuals.
The evidence from this study that children do have an active role in family decision-making could very well also have strong implications for marketing research and on how marketers target children.
''Are Children Decision-Makers Within the Household?'' by Anyck Dauphin, Abdel-Rahmen El Lahga, Bernard Fortin and Guy Lacroix is published in the June 2011 issue of the Economic Journal.
