Welcome to this presentation about the main concepts of the economics of individuals and households. Do you perhaps ask yourself what is economic about households? Aren't they units of love and caring, social units more than economic units? Yes, they're also social units. But they're clearly economic units too, consisting of individuals and the economic goals of providing for themselves and for those near to them. Of course you all will be familiar with the fact that households are sometimes harmonious with everybody joining in for the common good, and sometimes conflictious when individual interests are different or even opposed to each other. That is precisely where the economics of the household recognizes the possibility of both cooperation and conflict. I will elaborate this later in this presentation. But first, let's discuss the economic functions of the household. Economically speaking, households perform five functions. One is caring for each other, in particular with lots of unpaid work for children, the elderly, and the sick. We call that reproduction, unpaid caring for the current and future generation of labor and for others. Two is dividing up who does what, earning money or caring. This is joint production through a division of labor, which means specialization of household members in different skills and in paid and unpaid work. Three is like watching TV together or by different households or at different times of today. We call this joint consumption. And this has economies of scale. More people can enjoy the consumption of a single good, such as the TV. And it has economies of scope, such as the pleasure of having dinner together rather than alone. The fourth household function is income pooling, which is simply putting all your money together for joint expenditures. And the fifth function of the household is important in case of problems, such as illness, unemployment, or a bad harvest in a farming household. This fifth function is risk pooling. For example, when the breadwinner falls ill, another adult may take up a job. I hope I've now convinced you that households are economic units next to all the other roles and meanings in society. Now back to the cooperation and conflicts in households. Societies tend to have strong social norms about what men and what women should do, such as the roles of breadwinner and homemaker. These are norms concerning gender. Gender refers to the socially and culturally constructed differences between men and women with hierarchical meanings, often in favor of what is regarded as masculine. Gender often leads to typical blue and pink stereotyping. This stereotyping begins when kids are babies and it continues throughout sports, schools subject specialization, and eventually to job types. Hence we often see a gender division of labor in households based on gender stereotypes about work. Universally, men do more paid work and women do more unpaid work. On average, in most countries, the total hours worked is larger for women. Households show three categories of time use in a day, paid work, unpaid work, and leisure. But isn't cooking just fun and has leisure time rather than unpaid work? And what about gardening, is this unpaid work or a hobby? Let's take the example of making tea for yourself. Filling the kettle with water is work. Putting it on the fire is work. Getting the cup and the tea bag and the sugar is work. Filling the cup with tea is work. Stirring the sugar, is that still work? Well, if done for patient who cannot do it by herself, yes. But at home or in a restaurant, this is where the consumption of the tea starts, right? And of course, the drinking is consumption, and hence done in leisure time. It's clearly not work anymore. Work and leisure happen not only through cooperation, but also through conflict. Here is where household bargaining comes in. Household bargaining describes the continuous interactions between partners in a household in order to realize their individual and joint objectives of a sustainable livelihood for themselves and their dependents. Bargaining power comes from what makes you economically attractive to the other. What are the economic benefits that you bring to the household? The sources of bargaining power are resources, skills, and opportunities. These include income, assets, capabilities, social networks, estate support. But there's also a threat point, as in bargaining between a labor union and a factory. The threat point is where a party exits the negotiations. For example, in a labor dispute, a strike is the threat point for labor. In household bargaining, the threat point is also the exit situation for partner. This means that there must be a feasible option to break up and to live outside the household through independent resources, skills and opportunities. If this is not possible, then there is no credible threat point. Now I will take you through a basic example of household bargaining. Let's look at a young couple from Russia, Vladimir and Olga. The table with time-use data on unpaid work from a Russian village shows that Russian women do two and a half times more unpaid work than Russian men. A day has 24 hours, but 10 hours are used for sleep and personal care. So our calculations of the general division of labor and leisure time is always for the remaining 14 hours. Vladimir earns as a construction worker a higher wage than Olga, but Olga has a more stable job as a bus driver. Vladimir has a seasonal contract, Olga has a fixed contract. Under a regime of a gender unequal norm, as is the case in large parts of Russia, Vladimir works full-time. Olga works part-time. And while Olga spends 7 hours doing housework and childcare, Vladimir spends only 1 hour of unpaid work. So let's look at the division of labor between Olga and Vladimir with the help of a household production possibility frontier in the case of a gender stereotype norm. Vladimir works 8 hours for pay and 1 hour unpaid. This means out of the 14 hours available per day, he has 5 hours of leisure time. 14 hours minus 8 hours paid work and 1 hour unpaid work. Olga works part-time, only 4 hours for pay, but she does all the childcare and the housework and has only 3 hours of leisure time. 14 hours minus 4 hours paid work and 7 hours unpaid work. Their pooled income consists of 8 hours x 300 rubles per hour for Vladimir's job and 4 hours x 200 rubles for Olga's job. 8 x 300 is 2400 rubles, 4 x 200 is 800 rubles, so together, 3200 rubles. Are you still following me? They also produce home goods, childcare and housework, in total 8 hours of unpaid work, 1 by Vladimir and 7 by Olga. Now before you move on, be sure that you get the numbers, yeah? The situation with a gender equal norm shows different results. Now, both work 8 hours for pay. Vladimir earns as before 8 x 300, which is 2400 rubles. Olga earns now 8 x 200 which is 1600 rubles, so together, 2400 plus 1600 makes 4000 rubles. They also split the unpaid work fairly. Each of them contributes 3 hours of unpaid work, making the production of home goods 6 hours. As a consequence, each of them enjoys 3 hours leisure time. Now if you look at the diagram, you see a change. The possibility frontier has become steeper in the gender equal norm scenario as compared to the gender stereotype norm scenario. In a gender equal norm scenario, the household income is bigger, but the total leisure time is less, although now it is distributed more equally. The next two presentations will analyze household bargaining further. The social and institutional perspective focuses on conflict and the classical perspective focuses on cooperation. Which of the two theories do you find more realistic? And which one provides the best policy advice? Or perhaps you will find tips for how you could negotiate a better deal with your partner. Check it out for yourself.