Structural Estimation of Bargaining Power within the Family

This paper extends the literature on intergenerational transfers between adult married children and their parents in two ways. First, for a given couple, both sets of parents enter the optimization problem. Second, I develop and estimate a model where amount of transfers to the husband’s (wife’s) parents is assumed to depend on the couple’s income, the husband’s parents’ income, the wife’s parent’s income, and the bargaining power of husband (wife) within the family. Arguably it is plausible that each spouse cares more about their parents than their in-laws, and thus such transfers are a form of semi-private consumption. The estimation of this model takes into account that the functional form of the transfer to one set of parents will change if the optimal transfer to the other set of parents is zero. I find that husbands and wives have equal bargaining power in South Korea.