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Intrahousehold Bargaining, Female Autonomy, and Labor Supply: Theory and Evidence from India

Standard models of labor supply predict that unearned income decreases labor supply. In contrast, we propose a noncooperative bargaining model in which a woman's unearned income improves her autonomy within the household, which raises her utility of working and can increase her labor supply. We find empirical support for this prediction, using the Hindu Succession Act (HSA) in India as a source of exogenous variation in a woman's unearned income. The HSA was phased in across states and over time, and applied only to Hindu women who were unmarried at the time of the reform. We estimate its effects using an instrumental variable strategy that uses variation in a woman's year of birth, religion and state to predict her exposure. We find that the HSA increased women's labor supply, particularly into jobs likely to be high-paying, such as jobs working for non-family members, earning cash, and that take place outside of the home. We argue that these results cannot be explained by changes in pre-marital human capital investments, marital matching, or selective migration.

(Joint work with Xu Tan)