As mentioned earlier, one of the advantages of the FLS is that it provides information on the employment status and inheritance receipt not only of the respondent but also of the spouse, which makes it possible for us to examine whether who within a household received an inheritance is important. More precisely, we can use our dataset to test the unitary model, which regards the household as a single decision-making unit. Testing the unitary model is instructive for the following two reasons. First, if receiving an inheritance lowers the probability of being in work not only of the inheritor but also their spouse, our estimates so far understate the overall labor supply response. Second, if the unitary model holds, this may have important implications for the formulation of policies aimed at certain household members such as women and children. On the other hand, rejection of the unitary model means that who receives monetary transfers affects how they are spent.

A popular approach to test the unitary model is to examine whether relative income (the ratio of the husband’s income to the wife’s income) influences relative expenditure using cross-sectional data. However, as highlighted by Lundberg, Pollak, and Wales (1997) and Ward-Batts (2008), relative income may not be exogenous and, as a result, the unitary model may be rejected due to omitted variables. For instance, if preferences for expenditure and leisure are not separable, omitting relative hours worked could lead to the false rejection of the unitary model.

To address this problem, what is needed is exogenous changes in relative income. Lundberg, Pollak, and Wales (1997) and Ward-Batts (2008) exploit the 1979 reform of child benefit in the U.K., which resulted in an exogenous income shift from fathers to mothers. Meanwhile, Attanasio and Lechene (2002) focus on Progresa, a large-scale welfare program implemented in Mexico, in which monetary transfers are given exclusively to women in the household in order to improve the conditions of women in rural areas. More recently, Cesarini et al. (2017), using a dataset of lottery winners in Sweden, tested the unitary model by comparing the labor supply responses of winners and winners' spouses. If the unitary model holds, who in the household won the lottery should not affect each member's labor supply decision. However, all of these studies reject the unitary model.

To examine whether the unitary model is also rejected in our setting, we compare the labor response of those whose parent has died with that of their spouse. To the best of our knowledge, this is the first attempt to test the unitary model by focusing on inheritance receipts. Specifically, our approach is as follows. Our analysis so far has focused on the labor supply response of individuals whose own parent has died. For the sake of convenience, we refer to this as the “vertical analysis.” Here, we additionally focus on the labor supply response of the spouse of those whose parent has died, which refer to as the “cross analysis.” For example, if the husband’s parent has died, the “cross analysis” focuses on the labor supply response of the wife. Note that in the cross analysis, the individual wealth of the person we focus on has not increased through the spouse’s inheritance receipt. To test the unitary household model, we then compare the labor supply responses of the vertical and the cross analysis.

The ideal setup for this exercise would be to confine our sample to households in which we could