Wage Subsidy, Cash Transfer and Individual Welfare in a Cournot Model of the Household

We examine the implications of an income redistribution from men to women for the welfare of mothers and their children. We develop a Cournot model of a two-person household where agents provide market labor and allocate their spending between a private consumption good and goods for children. We show that, under plausible restrictions on individual preferences, small redistributions to women reduce their welfare. This happens because the income redistribution induces men to reduce their own spending on children by more than the amount redistributed. A relative increase in women’s market wage may however improve children’s welfare