What makes Europe and China different?: Finding answers from different patriarchy (Wolf 05)

*It was written as a report in Topics in Gender and Economics. 


The Hajnal line, which named after a Hungarian-English scholar John Hajnal, is a border that links Saint Petersburg, Russia and Trieste, Italy. West and east of this line show two very different marriage patterns: "European pattern" and "non-European pattern". Former is characterized by a higher age at marriage and a high proportion of people who never marry. Latter is completely opposite. It is characterized by a younger age at marriage and a low probability of not getting married. Moreover, this line not only divides marital patterns but also divides demographic and kinship regimes. But then why these two different parts show different types of marriage, demographic and kindship regimes? Wolf tries to find the answer to this question from the form of patriarchy.

As we have two parts of the world in terms of marriage and other demographic regimes, we have two according forms of patriarchy to explain the difference. One is ``property patriarchy", which is appropriate to explain Europe and the other is ``state patriarchy", which is for China (non-European). He assumes that parents want to control their children because children are useful resources. Under this assumption, patriarchy is a means of controlling their children. Under property patriarchy, parents try to control their children through their property. Under state patriarchy, parents use authority of state to control their children. In European countries, especially before absolutist state, the only way the parents could control their children was to give gifts or threatened disinheritance. This means that if parents didn't have enough fortune, they had no way to control their children. Parental authority was not high in Europe. Since parents didn't have control over children, it was hard for them to use their children as a labor force. This being the case, parents had no reason to invest in their children. Thus, marriage was formed only after individual has enough material basis to maintain family and is based on individual's consent rather than parent's arrangements. This is why the average marriage age was pretty high. Parents, lacking control over children, hired servants as a labor force. Since western countries had better contract enforcement, it was easier for the parents to hire people than to use their children as a labor force. Through this mechanism, European countries west of Hajnal line showed distinctive characteristics: late marriage, frequent celibacy, low fertility, low mortality, one married couple per household, a close link between marriage and entry into household headship, and servanthood as a common stage in the life cycle. 

In contrast to property patriarchy, state patriarchy is authorized by the state. In China, filial piety was emphasized and if children did not respect their parents state punished them harshly. Relying on this state authority, parents could gain strong control over their children. Thus, they used their children as a labor force. In societies with advanced agriculture, people needed plenty of labor force. Since every single family member acted as a labor, there was an incentive for parents to make their children marry early and give birth to children as many as possible. Parents preferred boy to girl because boy usually could work more and better. Statistics in China show that brotherless women were more likely to have children before marriage. This is because parents without boy made their daughter prostitute because in that way, they could make money. In sum, in countries where authorized state enabled parents exercise control over their children, parents tried to make profit through their children. This mechanism characterizes the eastern part of Hajnal line by early and nearly universal marriage, high fertility, high mortality, complex households containing two or more married couples, a long delay between marriage and household headship, and a tendency for people to employ their children at home rather than to let them out as servants.

Does Hajnal line still exist today? I would say no. Many eastern countries are westernized after 19th century as they adopted western legal system and mode of thought. Moreover, those countries are industrialized, so the need of hands in household is reduced. As a result, parents don't have such a control over children even in China and children are not valuable as before. Thus marriage pattern these days seems to be converging to what have been called "European pattern". In other words, convergence of patriarchy due to the change in society results in convergence of marriage and demographic regimes. Late marriage, low fertility, low mortality, and nuclear family are now common in both west and east of Hajnal line. 

Reference:

Europe and China: Two kinds of patriarchy by Arthur P. Wolf 

(This is a chapter of the book "Marriage and the family in Eurasia: Perspectives on the Hajnal hypothesis.)

What Men Want: Then and Now (New York Times)

 

Interesting...

 

What about women? What women want?

I guess for women, they want pretty same thing then and now.

 

http://www.nytimes.com/imagepages/2012/02/12/opinion/sunday/12-coontz-gfx.html

How to View Marriage in the Eyes of Economics: Comparing Becker (1973) and Edlund (2013)

*It was written as a report in Topics in Gender and Economics.


Marriage, a socially or ritually recognized union or legal contract between spouses, is a universal phenomenon across different cultures even though the forms are various (monogamy, polygamy, same-sex marriage, etc.) Gary Becker (University of Chicago) first started to analyze marriage, which seems to have no connection with economics at first site, in the framework of economics and kicked off family economics. Like other economics model, agents maximize utility and decide whether to marry or not by weighing costs and benefits of marriage. Marriage market, which is filled with many single men and women, are in equilibrium state. With this model, we can induce many implications related to marriage such as how sorting occurs and how women decides labor force participation, etc. However, since this was the very first economics paper which analyzed marriage, there were also some unsatisfactory predictions. For example, Becker predicted negative sorting in terms of wages but empirically, we observe positive sorting for wages (i.e. wealthy man marries wealthy woman). Edlund (2013) also adopts economic model to analyze marriage but she viewed marriage in different aspect. She interpreted marriage as men's means of obtaining children. This view helps to explain the phenomenon which Becker couldn't explain clearly. Thus it is worth comparing those two influential papers in detail.

 

First of all, the definitions of marriage in both papers are different. Becker defined marriage as sharing the same household. But Edlund defined marriage as a contract over parental rights where women sell and men buy. This view of Edlund stems from women's absolute advantage in bearing and giving birth to a child. This ability is exclusive to women. Compared to Edlund, Becker emphasized comparative advantage of men and women. With marriage, men and women specilize in labor market or household chores according to their comparative advantages as if countries concentrate on production with comparative advantage and trade. Becker thought gains of marriage are mainly from this specializing. But Becker also recognized that children is very important factor for marriage. He thought that children are one of the important gains from marriage so reflected this in his model by assuming that time of men and women are not perfect substitute. In terms of having a child, men and women cannot be perfect substitutes and complements are rather appropriate. In sum, Edlund emphasized innate differences of men and women and Becker put emphasis on comparative differences of men and women.

Those papers importantly address the issue of sorting in marriage market. How men and women are matched according to their many characteristics is interesting and important question. According to Becker, postive sorting occurs for most characteristics such as physical capital, education, intelligence, height, race, etc. But for earnings and traits of men and women that are close substitues, negative sorting occurs. The reason for negative sorting is also related to specilization. By matching man who earns well and woman who earns not well or man who earns not well and woman who earns well, we can maximize total output. This is because if someone with low earning ability specializes in household production, forgone earning is minimized. The logic is very clear cut. But the problem is that this does not match with the data. Edlund's model overcomes this pitfall of Becker model. As mentioned above, in her model, men pay for marriage because they obtain parental rights through marriage. In this case, negative sorting is unlikely. Men tend to marry down then the remainings are low quality men and high quality women. In this case, it is unlikely for them to be matched. High quality man did not marry high quality woman because she was too expensive for him. This being the case, it is likely that low quality cannot pay that expensive price neither. If low quality man's outside option to be single is too bad, then he might be willing to pay for that expensive price. So negative sorting can happen but is very unlikely.

Another advantage of Edlund's model is that it can explain why non marital cohabitation occurs. Since Becker's model defined marriage as sharing same household, there was actually no difference between legal marriage and non marital cohabitation. I guess at that time, non marital cohabitation was less common than these days, so he overlooked the difference of marriage and non marital cohabitation. In Edlund's model, non marital cohabitation also gives men rights for children, but this rights are more restricted than the rights coming from marriage. Non marital cohabitation is likely to involve low quality men because they pay less for non marital cohabitation. Since we have rising non marital cohabitation and children born outside of marriage, explaining why this happens and how this affects overall marriage market is important question. One of merits of Edlund's model is that she incorporated non marital cohabitation in the model and opened the door for analyzing young people's matching trend.

Career concern 2 (Morris 2001)

*'Reputation' rather than 'Career concern' is more appropriate title for this post. For the purpose of categorizing, I use 'Career concern' again. Please understand it!


 I think there are three kinds of people out there.

 1. One kind is people who make compliments all the time. Whenever I wear new clothes or get a haircut (if they realize that), they say "You look great!!!" or "I love that style" something like that. I feel happy when I listen those compliments but since they give good comments all the time, there is no information. It is not possible to know whether it is really good or not based on their words.

 2. Second kind is people who never exaggerate. They give good comments only when they really think in that way. When I brought a new bag and they say nothing, then I might feel sad. But if they give me some compliments, I would be much happier because I know that they never say empty words and it really looks good. Since they act differently in different situations, I can infer some information from their words.

 3. Third kind is people who are never interested in me :p.

 Suppose compliment of first kind gives utility v1 and compliment of second kind gives utility v2 (v2 > v1). What should my strategy to make people around me happier be? There is a tradeoff: If I adopt first strategy, I can give small utilities a lot of times. But since my word is not considered as very sincere, I cannot give big utilities to people even when I really think those clothes look very good. In contrast to this first strategy, second strategy gives large utility when I make compliment. But most of the time, I don't give utility to people. The answer might depend on many other things such as frequency of new clothes or people's discount factor, etc.

 What I want to focus here is the following: To make my words have impact, I have to build reputation for being faithful.

 "Political Correctness" by Stephen Morris (JPE, 2001) addresses this kind of reputation issue. Interesting thing here is that if someone has a big motivation to build a reputation, opposite side lie (to be more specific, people can be more reserved in making compliments) can occur. From above example, second kind person might choose to stay silent even when something looks fairly good. She just makes a compliment when she thinks it is very very very good. Then her words have big impact. This paper addresses this kind of adverse effect (second kind people have an incentive to reduce compliments and this creates in overall inefficiency…) of reputational motive. (Caveat! Model is not perfectly fit for explaining above example. I chose above example to show the motivation to act passively now to have an impact later.)

 Here is an example which is better fit for this specific model. Policy maker wants to get some advice from social scientist. But policy maker knows that there is a positive probability that social scientist is biased. Suppose that social scientist is not a racist (in other words, not biased). But he doesn't like affirmative action because he thinks it is ill-conceived policy. He can suggest that affirmative action is not a good policy and policy maker will believe in him and decide not to adopt affirmative action because she thinks that the probability of social scientist being a racist is small. But in this case, the posterior probability that he is a racist goes up. If social scientist is concerned about reputation very much then he might lie and support affirmative action just not to be considered as a racist. This being the case, he is not considered as faithful so his word loses impact and socially valuable information is lost.

 Summarizing this paper in one sentence, if informed side is sufficiently concerned about future reputation (in the model, second period), no information is conveyed in the first period. In other words, reputational motive might block efficient information transmission and lead to socially inefficient result.

 Basic game is as follows. There is 2 periods and there are an informed player and an uninformed player. Informed player gets signal about true state. This signal is not 100% right but still informative. After seeing the signal, informed player sends message about true state to uninformed player. Then uninformed player makes a decision. There is a positive probability that informed player is biased (let's say this as 'bad') so when uninformed player makes a decision, he takes account of this fact. After decision being made, true state is realized. Uninformed decision maker updates his belief about advisor (whether she is good or bad). Then second round is played. (informed gets signal->informed sends message->uninformed makes a decision)

 Agent's type (good/bad) is defined according to congruence of preferences. If agent (informed player) has same preference with principal (uninformed), he is called 'good'. Otherwise, he is 'bad'. Since message does not directly affect utility (sending message is not costly), this game is 'cheap talk' game. In a standard cheap talk game (Crawford-Sobel 1982), there was only one type of message sender and sender and receiver didn't have perfectly same preferences. According to the degree of congruence of preferences, we had partition equilibrium with different number of partitions. But here we don't try to find partition equilibrium because we have either exactly same preference (good) or totally different preference (bad). (We might extend the model to allow some difference in preference for good sender and receiver. But I think for our purpose, this only complicates the analysis.) We focus on how different types behave.

 For both types, it is good to have reputation so both types invest in reputation to some extent. Investing in reputation is more costly to bad type. Thus basically, good type invests in reputation more. But this might lead excessive investment in reputation for good type. If good type is too concerned about reputation (in other words, he highly cares about the future), he will try to build reputation despite sacrificing having to lie. In order to maintain good standing, good types sometimes make a lie. This being the case, no informative equilibrium exists.

 But above result does not imply that reputation building is always bad. Reputation concern has some beneficial effects too. Because of the existence of reputation, bad advisor will be more disciplined and principal can infer something from agent's behavior. This is unquestionably good parts. Excessive investment in reputation of good type which we saw above is bad part. To do welfare analysis, we have to weigh beneficial effect and detrimental effect of reputation building.

 We looked at several dimensions of reputation building. If we had a contingent contract which rewards truth telling, more accurate information would be transmitted. But in many real life contexts, this contingent contract is not enforceable. We cannot punish social scientists even if he made a bad advice. So this model is useful in the situations where contingent contract is not possible. In this sense, this paper has some similarity with Holmstrom's model which I introduced in previous post. I think varying the probability of each state and preferences of bad type might be interesting exercise. Also, extending periods can be also interesting extension. I think this extension might be related to 'relational contracts' which I will learn soon in the class.

 Another thing I want to mention is the role of noise in both Holmstrom and Morris. In Holmstrom model, we had zero effort without noise in ability if time goes to infinity. In Morris model, we have an equilibrium in which both types tell the truth in the first period if there is no noise in signal. (This equilibrium is good but not interesting in the sense that we wanted to study how political correctness might lead good type’s lie.) Without signal, everything becomes so obvious. For example, in Morris, if signal is correct all the time, if bad type lies and the state is realized differently, principal will easily infer that agent is bad. In other words, cost of lying becomes huge, because there is no margin for anonymous mistake. If there is noise, bad type lies and then can insist that “I am good type. But unfortunately, signal was wrong…” Principal can never perfectly distinguish bad type’s intentional lie and good type’s mistake. This creates incentive to lie. In Holmstrom, if ability is known for sure in the limit, there is no incentive to make an effort. But if there is some noise in ability, agent keeps trying to make an effort to show that he is good. As in Morris, principal can never know ability for sure, and this can sustain some stationary level of effort.


 Interesting article about this paper: http://www.economist.com/node/656347/print?Story_ID=656347

Career concern 1 (Holmstrom 1999)

 In the firm, one of the most important issue is to effectively induce efficient level of hard work from employees. The problem is the level of effort cannot be accurately observed because usually it is too costly to monitor every single action of an employee. But then there always is an incentive to shirk. For example, an officer sitting in the office from 9am to 6pm might just watch episodes during entire work hours if there is no one who monitors him. This is not what the firm wants from its employee. This is so called moral hazard problem. Here is where the necessity of a "contract" kicks in. By writing a well designed contract, firm can induce better level of effort. Moral hazard literature explores how to design the contract to make the employee work harder and this constitues a big part of contract theory. 

 But interestingly Eugene Fama stated that even without long term or contigent contract, employees will put efficient amount of effort themselves in the dynamic settings. This is because they care about their future career; since future compensation will be based on the current performance, employees exert effort to maintain their reputation and ultimately get better compensation in the future. In other words, having "implicit contract" rather than explicit output contingent contract is enough to guarantee efficient employee behavior. Fama didn't prove his statement so it remained as a conjecture until Holmstrom formalized that idea.

 Holmstrom's model (which was published in Review of Economics Studies in 1999) became a basic model of so called career concern literature. Model is very clear to follow and through this model we will see that Fama's conjecture is right under some restricted assumptions. In general, Fama's conclusion is wrong which means that there are many cases in which efficient level of effort cannot be achieved even if there is career concerns. In the model, we assume that there is no contingent contract. Thus, this is different from contract theory which tries to design incentive schemes. Rather than that, this is an equilibrium theory and we seek a Perfect Bayesian Equilibrium (PBE). 

 There is an employee(e.g. manager) who sells his labor to the market. The outcome is decided by his ability, his effort and some random component. Ability of manager is not known to himself and market. (This is important assumption of this model! Since both parties don't know about the ability, information is symmetric. Otherwise, adverse selection and moral hazard coexist, which makes problem more difficult...In addition to that, this assumption is realistic in the sense that employee usually doesn't know his ability well in their early ages.) Since information is symmetric, firm can infer the action of manager. 

 In the market, there are so many firms out there which want to buy labor. Thus firm cannot make any profit and since we assume firm is risk neutral, wage is equal to the expectation of employee's ability plus expected effort level. There exists some prior distribution on employer's ability and firm updates this by seeing the outcome. Expecting that firm will set wage in this way, manager chooses effort optimally. In equilibrium, manager's effort level of each period and wage process of firm are decided. Employee tries to make high effort at the first time to make firm think he has high ability. But as time goes by, firm's belief about ability becomes more accurate so actual ability level is revealed. Then, manager doesn't have any incentive to make additional effort to make expectation of ability higher. So if time goes to infinity, effort level converges to zero. 

 Above prediction is a bit depressing because having zero effort at the limit is nothing to do with efficient level of effort... This is because we assumed not varying ability. After ability is fully known at some point through firm's continuous updating of belief, there is no reason to make an effort to maintain high reputation. We add uncertainty to ability. By doing this, ability can never be known for sure. In this case, there exists a stationary effort level. That is, employee keeps making an effort to maintain high reputation of their ability. However, unless there is no discounting, efficient level of effort cannot be obtained. This is because, making an effort today will only be reflected in the tomorrow's wage so there is some depreciation of the value of making an effort. Consequently, according to Holmstrom's model, Fama's conjecture is right only if there is no discounting. 

 Some other interesting comparative statistics to note are as follows: reputation formation is effective if 1. uncertainty about ability is bigger and 2. uncertainty about outcome is smaller. Effort is substitute for ability here. The more unknown about ability, the more incentive to make efforts to show that he has high ability. For uncertainty about outcome, if it is big then even if high outcome results, firm might think this is attributed to pure luck. Thus, return to make an effort decreases and the equilibrium level of effort becomes smaller. 

 Dynamic environment usually creates different incentive structure than static environment. Employee concerns not only about today's happiness but also about future's career. If there were only today, employee would just shirk and enjoy the moment. However, since tomorrow and the day after tomorrow and so on exist, shirking today and getting lower wage afterwards are not optimal. He needs to make some effort to maintain decent wage in the future. In the reality, writing contingent contract on every situation is really hard. So it is delightful result in that firm can achieve certain level of effort even without outcome contingent contract. But still, there is some inefficiency resulting from discounting, so we need think about how to enhance efficiency more. I guess Gibbsons and Kevin (1992) addresses this issue.... 

Purpose of this blog:

Big part...

As a PhD student of Economics, I mainly plan to post some interesting academic stuff.
Most of them will be from my class materials. (summary, discussion, and my thoughts)
Since I take both theoretical and empirical industrial organization this semester, topics will rotate around IO at this time.
In addition to that, I am interested in labor economics. Specifically I wrote a master's thesis on how obesity affects labor market outcome (more generally socioeconomic status). I plan to delve into this topic more seriously, so some posts will be related to this.
I would love to get any comments on my writing and thoughts.

Small part...

I live in the New York City, which is filled with so much fun... So some posts will be about food or ballet show which I love so much.