Children and non-participation in a model of collective household labor supply

The collective model of household behavior is extended to consider the existence of public consumption, like expenditures on children, together with the possibility of non-participation in the labor market of one partner of the adult couple. This model argues that structural elements of the decision process, such as individual preferences and the intra-household distribution rule of non-public expenditure, can be identified by observing labor supply of each individual and total expenditures on the public good. The identification rests on the existence of a variable that affects household behavior only through its impact on the decision process, i.e. a distribution factor, and the existence and uniqueness of a reservation wage for each household member at which both members are indifferent to whether a member participates or not. This setting provides a conceptual framework for addressing issues related to the impact of the potential wage of a non-participating member on household allocations and the targeting of specific benefits or taxes.