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Environmental Economics Seminar: Pareto Efficiency in Intra-household Resource Allocation and Risks to Children’s Health

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Date(s): October 28, 2013, 1:30 - 3 PM

Location: Room 4128, William Jefferson Clinton West Building, 1301 Constitution Ave., NW, Washington, DC

Contact: Carl Pasurka, 202-566-2275

Presenter: Shelby Gerking (Department of Economics, University of Central Florida)

Description: The paper examines parents’ allocation of resources to reduce health risks to themselves and their children, presents novel tests for Pareto efficiency within the household, and examines how a shift in decision power between parents affects their marginal willingness to pay to reduce their children’s health risk. Analysis is based on a collective model of parental resource allocation that incorporates household production of perceived health risks and allows for differences in preferences and risk perceptions between parents. The model is tested using data from a stated preference survey involving 432 matched pairs of parents married to one another (864 parents). The research design employed supports tests for efficiency that address complications posed by hypothetical bias and endogeneity. Results are consistent with Pareto efficiency within the household and indicate that efficiency is maintained in the face of a redistribution of decision power between parents.


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