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Abstract

Can an increase in male wages make the woman in the family, or even the whole family, worse off? On the face of it, this seems paradoxical, since the overall resources of the household are improved by the wage increase. This paper shows that the chain reactions set in motion by such a wage increase in labor markets can end up by making not only the woman but the whole family worse off because of the interactions between intrahousehold public goods, extrahousehold public goods, and the outcomes in conventional labor markets. The key is specialization of males and females in different activities, the public goods characteristics of some of these activities, and the effects of the outside options defined by these activities on intrahousehold bargaining.

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