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Economic well-being and poverty among the elderly: An analysis based on a collective consumption model

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  • Cherchye, Laurens
  • De Rock, Bram
  • Vermeulen, Frederic

Abstract

We apply the collective consumption model of Browning et al. (2010) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife's share that is increasing in total expenditures. We further calculated two sets of poverty rates: one based on the collective consumption model and one based on the traditional approach with a standard equivalence scale. Poverty among widowers is underestimated by the traditional approach. The same is true for women (men) in elderly couples for the first (later) time periods in our analysis. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop in material well-being following the husband's death is rather substantial for women. For men, the picture is reversed.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 6 ()
Pages: 985-1000

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:6:p:985-1000

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Collective model; Intra-household allocation; Indifference scales; Economies of scale; Poverty;

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Citations

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Cited by:
  1. Dekkers, Gijs, 2008. "Are the old poor? A discussion and some cursory evidence," MPRA Paper 29436, University Library of Munich, Germany.
  2. repec:hal:wpaper:halshs-00586686 is not listed on IDEAS
  3. Cherchye, L.J.H. & Rock, B. de & Lewbel, A. & Vermeulen, F.M.P., 2012. "Sharing Rule Identification for General Collective Consumption Models," Discussion Paper 2012-041, Tilburg University, Center for Economic Research.
  4. Hélène Couprie & Gaëlle Ferrant, 2012. "Welfare Comparisons, Economies of Scale and Equivalence Scale in Time Use," THEMA Working Papers 2012-43, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  5. Bütikofer, Aline & Gerfin, Michael, 2009. "The Economies of Scale of Living Together and How They Are Shared: Estimates Based on a Collective Household Model," IZA Discussion Papers 4327, Institute for the Study of Labor (IZA).
  6. Lewbel, Arthur & Pendakur, Krishna, 2008. "Estimation of collective household models with Engel curves," Journal of Econometrics, Elsevier, vol. 147(2), pages 350-358, December.
  7. Lucia Mangiavacchi & Luca Piccoli, 2009. "Child welfare and intra-household inequality in Albania," Working Papers 149, ECINEQ, Society for the Study of Economic Inequality.

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