8 Conclusions
Bargaining models of household wealth accumulation point to a potential conflict of interest between husbands and wives. Since wives are typically younger than their husbands and have longer life expectancy, they have to finance a longer expected retirement period. Thus, it is argued that when women have greater relative bargaining power, households will accumulate higher levels of wealth. Some evidence for this effect has been found in the United States by Lundberg and Ward-Batts (2000a&b). Yet in New Zealand, the evidence is exactly the opposite. We find that the higher is women’s bargaining power, the lower is net worth for a sample of pre-retirement couples.
Our explanation for this apparent empirical anomaly is that the public pension system in New Zealand replaces a larger fraction of pre-retirement income for women than for men. Thus, the required saving rate for women’s retirement is considerably lower than for men. Our results are consistent with the observation of Bernheim (1999) that, despite their longer lives, single women in the U.S. appear less inclined to save than single men. So as long as married women have the same gender specific proclivities, any shift towards the preferred profile of the wife would increase consumption, not decrease it.
Our results suggest that bargaining has very important effects of a range of outcomes of interest to policy makers. However the particular outcome of bargaining will depend on the policy context in each country. Thus, even when bargaining is over the same problem -- ensuring adequate retirement incomes for women – we should not expect to find the same patterns of either more or less wealth accumulation, because of the variation across countries in the level of public support for women’s retirement incomes. In settings where public pensions are relatively generous and have features that do not disadvantage women, but where working age women have significantly lower incomes than men, it makes sense for bargaining power to be directed at increasing current consumption by women. Thus, power and wealth need not necessarily go hand-in-hand.
