Pooling of income and sharing of consumption within households

Abstract

There is extensive literature in economics and economic psychology on the allocation of household income within the household. In economics this refers to household decisions being independent of who generates the income in the household; in economic psychology it refers to the management of household finances. Here, we consider the link between the two concepts using a Danish expenditure survey providing information on both notions and on the assignment of expenditures. More importantly, we investigate whether either type of pooling is related to the sharing of expenditures between the two partners, and whether there are different correlations between the income distribution and the sharing of expenditures among double-career couples and other couples. We find that in most households the income distribution is correlated with the sharing of consumption—the economic approach—and that this holds true even if the household pools its resources—the economic psychology approach, implying that there is no strong relationship between the two approaches.