I study whether households make Pareto‐efficient intrahousehold resource allocation decisions. Combining randomized variation in women’s income generated by the evaluation of the Mexican PROGRESA program with variation attributable to localized rainfall shocks as distribution factors in the collective model, I find evidence favoring Pareto optimality. More specifically, female‐specific income changes have positive effects on children’s goods expenditures, whereas changes due to rainfall shocks have a smaller influence on household public goods expenditures. The evidence is consistent with female partners having greater sensitivity to own‐income changes and norms that oblige women to devote their earnings to meet collective consumption needs.

This paper identifies neighborhood peer effects on children's school enrollment decisions using experimental evidence from the Mexican PROGRESA program. We use exogenous variation in the school participation of program-eligible children to identify peer effects on the schooling decisions of ineligible children residing in treatment communities. We find that peers have considerable influence on the enrollment decisions of program-ineligible children, and these effects are concentrated among children from poorer households. These findings imply that policies aimed at encouraging enrollment can produce large social multiplier effects.