Why Do Spouses Hide Income

Abstract

This paper proposes a simplified model of intrahousehold decision making where cooperative and noncooperative behavior are not mutually exclusive. Individuals choose the optimal share of income they wish to devote towards cooperation, where income is pooled and allocated collectively, and towards noncooperation, where income is allocated independently. Using the example of joint saving as an area of household cooperation, this model shows how limited autonomy and bargaining power can interact to create incentives for individuals to hide income. This result provides theoretical support for the call to collect survey data separately from individuals rather than from household representatives.