Household Division and Rural Economic Growth

Abstract

The recent availability of longitudinal data from low-income countries makes possible for the first time the identification of the consequences of growth-augmenting innovations for household income change. However, it has become increasingly recognized that both the analysis and design of panel surveys is importantly affected by the break-up of households over time. In this paper we formulate, test, and estimate a structural model of household division. The model yields implications for how household size and intra-household inequality interact with exogenous income growth to affect (i) the amount of the household public good that is consumed, (ii) which households divide, (iii) the exact divisions of the assets among the new households, and (iv) the evolution of the incomes of the new configurations of households. The model is estimated using panel data describing Indian farm households starting from the onset of the Indian green revolution in the late 1960's through 1982. The estimates indicate that inattention to the consequences of technical change for household division can lead to a substantial overestimate of the extent to which better-off households differentially benefit from technical change and demonstrate that the amount of within-household inequality can have important effects on the evolution of land assets over time and for the interhousehold distributional consequences of economic growth.