Welcome to this presentation on household bargaining in a combined social and institutional economic perspective. We will continue with the example of Vladimir and Olga as presented before. In social and institutional economics, we distinguish between short run outcomes and long run outcomes of household bargaining. Moreover we look at context, in particular institutions. Remember from chapter one that institutions can be formal such as laws and informal such as social norms. In this example we will take gender norms into account. Gender norms matter for who does what and who gets what. What are relevant wellbeing outcomes? Well, these are not given, but depend on the context. They may include living together in a bigger house, instead of each separately in a small apartment. Earning an independent income matters too. In particular in the long run, in the case of divorce or widowhood. Not only the size of income but also the stability of income is important. But gender norms whether stereotype or equal, may raise tensions between Vladimir and Olga or between them and a family of friends. Finally, leisure time and fairness can be important as well. Now we will compare the bargaining outcomes under two scenarios, the gender stereotype norm and the gender equal norm. Bargaining analysis can be summarised in a pay off matrix. We distinguish between the short run and the long run. In the long run, the household may break up, so the threat point matters. Remember from the previous presentation the threat point marks the wellbeing situation when a person exits the joint household. For the sake of the analysis we will assign numbers between zero and three to the level of wellbeing of each attains on each indicator, this is arbitrary. For example the score is zero for independent income when a partner does not earn enough to live alone on his or her income. And the score is three when the income is more than sufficient to live independently. For income security, you will see that Vladimir scores lower than Olga in the long run. This is because Vladimir has a seasonal contract, not all year round. Olga however is a fixed all year round contract. Hence, Olga's income is more secured even though it is lower than Vladimir's. We will start within evaluation wellbeing outcomes into gender stereotype norm scenario. Are you still following me? Let's start with the short run. Vladimir and Olga both enjoy living in a big house together, having relative income security from Vladimir's income and living with baby Borris. But Olga suffers from having no independent income, less leisure time in the fairness of the equal division of houseworks. So, her efforts wellbeing shown in the bottom row adds up to one on a scale from one to three. But Vladimir clearly benefits from the stereotype gender norm. His efforts wellbeing adds up to three points. Let's now focus on the long run wellbeing outcomes, pictured on the last two columns of the diagram. Upon divorce Olga has to live in the big house, there is no income, and no income security, she will probably live with her child. While Vladimir will not, gave for the dominant gender norms in Russia. The efforts pay off for Vladimir will be two points, and for Olga, only one point. So, in the gender stereotype norm scenario, Vladimir's potential wellbeing in the short run and the long run will be three plus two is five points. For Olga, the potential wellbeing is only one in a short run and one in a long run, together, two wellbeing points. It's clear that a gender stereotype norm benefits Vladimir more than Olga, why? Because money is power. Let us now turn to the evaluation of wellbeing outcomes in the gender equal norm scenario. In the short run, Vladimir benefits from the fact that now Olga also earns a full-time income. But Vladimir suffers from gender equal norm, which conflicts with a dominant norm in his society. Moreover, he may have conflicts with family and friends about the norms. Perhaps his friends make a fool of him and his parents are embarrassed that their son shares in cooking and changing the diapers of baby Borris. Finally, Vladimir enjoys less leisure time as compared to the scenario with a gender stereotype norm. Olga however, clearly benefits from the new situation. Although she suffers from tensions with Vladimir and conflicts with others, such as her parents-in-law and some of her friends who think that she is way too bossy at home. If the couple would divorce the long run situation reflects that of a threat point for both. They both have their own income, although Vladimir's job is less secured than Olga's, so his income security is a bit less in the long run as compared to the short run. So all the note, in a gender equal norm scenario the short run benefits are equal for the two, namely two points. And also in the long run scenario the wellbeing effects are equal, namely three points for each. Now we can compare the two scenarios of gender norms. For this comparison, we use a pay-off matrix for the average wellbeing outcomes of household bargaining for each partner, and also for the two together in the final column. The results are interesting. Remember that the gender stereotype norm scenario benefited Vladimir more than Olga. In the short run, you got three points, Olga only one. You can see this from the first pair of numbers. The first mentioned is for Vladimir, the second one for Olga, it reads 3, 1. In the long run, the wellbeing points were two and one, so the total wellbeing in this scenario, short run and long run together is three plus one plus two plus one which makes seven. In a gender equal norm scenario Olga benefits is compared to the stereotype scenario both in short run, two points instead of one, and in the long run, three points instead of one. Vladimir loses a point in the short run, from three to two. And he gains a point in the long run, from two to three. The total number of wellbeing points in the gender equal norm scenario is ten. You can check this for yourself by adding up the wellbeing points for Vladimir and Olga, in short run and the long run. In conclusion, the total wellbeing in a gender equal division of labor is higher than in a gender stereotyped division of labor. For Vladimir, the results are the same under the two scenarios, while Olga, clearly benefits from a gender equal scenario. Hence, for the economy, as a whole, their wellbeing will increase when gender norms become more equal. The question is, however, how can Olga convince Vladimir to accept it if his own well being does not change between the two scenarios. And which policies can help in such a shift? This is a difficult policy question. But, there's also another theoretical perspective possible on household bargaining. Curious about what that perspective has to say? Just click on the next video, which presents the neoclassical perspective.