Intra-household Resource Allocation and Familial Ties

In this paper, we investigate the link between intra-household resource allocation and familial ties between household members. We show that, within the same geographic, economic and social environments, households where members have `stronger' familial ties (nuclear family households) achieve near Pareto efficient allocation of productive resources and Pareto efficient allocation of consumption while households with `weaker' familial ties (extended family households) do not. We propose a theoretical model of the household based on the idea that altruism between household members vary with familial ties which generates predictions consistent with the observed empirical patterns.