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Abstract
Using data on individual consumption expenditures from a sample of farm households in the Philippines, we construct a direct test of the risk-sharing
implications of the collective household model. We are able to contrast the
efficient outcomes predicted by the collective household model with the outcomes
we might expect in environments in which food consumption delivers not only utils,
but also nutrients which affect future productivity. Finally, we are able to
contrast each of these two models with a third, involving a hidden action problem
within the household; in this case, the efficient provision of incentives implies
that the consumption of each household member depends on their (stochastic)
productivity.
The efficiency conditions which characterize the within-household allocation of food
under the collective household model are violated, as consumption shares respond to
earnings shocks. If future productivity depends on current nutrition, then this can
explain some but not all of the response, as it appears that the quality of current
consumption depends on past earnings. This suggests that some actions taken by household members are private, giving rise to a moral hazard problem within the
household.