Consumption and the Within-household Income Distribution: Outcomes from an Australian "Natural Experiment"

Abstract

Does the within-household distribution of income influence household consumption patterns? In one attempt to answer this question, Lundberg, Pollak and Wales (1997) exploited the ‘natural experiment’ of a change in family benefits in the UK. They found that the within-household income distribution did have a significant impact on expenditure. This paper exploits a similar natural experiment in Australia. During the 1990s, unemployment benefits for unemployed married couples changed from being paid almost entirely to husbands, to being paid primarily to wives. Using household expenditure data it is found that, although the changes in the within-household income distribution were large, the changes in expenditure patterns were small and not in the expected direction. The data do not, therefore, provide support for the hypothesis that women's control over household expenditure was increased. The paper concludes with a discussion of the possible reasons for this. (JEL J10, J12, I38)