Testing the Validity of a Single Distribution Factor in a Dynamic Collective Model

Identifying a collective model requires a distribution factor that generates exogenous variation in bargaining weights between family members. We propose a method to test the exogeneity of a distribution factor. In derivation, we assume a general dynamic collective model which allows for intertemporal substitution and home production. Next, we apply our framework to test whether a local sex ratio - a popular distribution factor in the literature - satisfies the exclusion restriction using Japanese and Australian data. We reject the exclusion restriction in both countries. Evidence suggests that this is due to its confounding with local gender norms