The Impact of a Permanent Income Shock on the Situation of Women in the Household: The Case of a Pension Reform in Argentina

Abstract

Income transfers from social programs are often not gender neutral, according to the vast literature on intrahousehold decision-making and allocation, and should affect the distribution of bargaining power within the household. This result, however, was by and large established under the assumption of marriage stability. If this assumption does not hold (because of divorce or separation), then the positive response of bargaining power to income found in the empirical research may be the artifact of sample selection. In this paper, we prove that the marriage stability assumption is wrong, even when applied to seniors. We use a noncontributory pension reform in Argentina, which resulted in an unexpected and substantial increase in permanent income for at least 1.8 million women, to study its effects on outcomes related to both marital stability and women’s bargaining power within the household. We find that the reform increased the probability of divorce or separation among highly educated senior women but had no impact on those with less education. Instead, the latter gained considerable bargaining power within the household by decreasing the probability of being the only one in charge of household chores along with an increase in their husbands’ participation in these chores.