Endogenous gender power, household labor supply and the demographic transition

We present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women. Bargaining between the wife and the husband forms the basis of household decisions. Marital bargaining power is determined according to the incomes of the spouses, which in turn help to determine their reservation utility levels outside the marriage. The endogeneity of bargaining power introduces a non-cooperative element to the couples' decision-making problem because both the husbands and the wives take into account how their pre-marital education decisions affect their marital power and the share they extract from household resources in the future. The model predicts that wives invest more than is Pareto efficient in their education in order to increase their bargaining power in marriage. As a consequence, couples have fewer children and consume more when exogenous structural changes lead women to invest more in education. A corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure.