Is sex ratio a valid distribution factor in a collective model?

Abstract

A distribution factor generates exogenous variation in household members’ bargaining weights, and therefore, it helps identify a collective model. We derive testable hypotheses of the exogeneity of a single distribution factor in a general collective model. Next, we test whether the local sex ratio – a popular distribution factor in the literature – satisfies the exclusion restriction required of distribution factors using the dual-earner sample in Japanese and Australian data. We reject the exclusion restriction for Japan but not for Australia, which is explained by a dependency between the local sex ratio and local gender norms in Japan. We discuss its implication on the marriage market matching model equilibrium. Next, we conclude by investigating alternative distribution factors, but we find similar endogeneity issues in the Japanese sample, implying that understanding cultural context would be critical when choosing a distribution factor.