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Opening the black box of intra-household decision-making: theory and non-parametric empirical tests of general collective consumption models

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Author Info
Cherchye, Laurens
Rock, Bram de
Vermeulen, Frederic (Tilburg University, Center for Economic Research)

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Abstract

We non-parametrically test a general collective consumption model with public consumption and externalities inside the household. We further propose a novel approach to model special cases of the general collective model. These special cases include alternative restrictions on the 'sharing rule' that applies to each household, and which defines the distribution of the household budget over the household members. A limiting case is the unitary model. Our application uses data from the Russia Longitudinal Monitoring Survey (RLMS); the panel structure of this data set allows non-parametric testing of the behavioral models without relying on preference homogeneity assumptions across similar individuals. This application includes test results but also a power analysis for different specifications of the collective consumption model. Our main findings are that the most general collective model, together with a large class of special but still fairly general cases, cannot be rejected by the data, while other restricted versions of the general model, including the unitary alternative, are rejected. Since these tests are entirely non-parametric, this provides strong evidence in favor of models focusing on intra-household decisionmaking.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 51.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200551

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Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June. [Downloadable!] (restricted)
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  2. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best nonparametric bounds on demand responses," IFS Working Papers W05/20, Institute for Fiscal Studies. [Downloadable!]
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  3. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July. [Downloadable!] (restricted)
  4. Martin Browning & Pierre-AndrŽe Chiappori & Arthur Lewbel, 2004. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Boston College Working Papers in Economics 588, Boston College Department of Economics, revised 04 Sep 2006. [Downloadable!]
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  5. Frederic Vermeulen, 2005. "And the winner is... An empirical evaluation of unitary and collective labour supply models," Empirical Economics, Springer, vol. 30(3), pages 711-734, October. [Downloadable!] (restricted)
  6. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03. [Downloadable!] (restricted)
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  7. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January. [Downloadable!] (restricted)
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  8. Susan K. Snyder, 2000. "Nonparametric Testable Restrictions of Household Behavior," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 171-185, July.
  9. Varian, Hal R, 1983. "Non-Parametric Tests of Consumer Behaviour," Review of Economic Studies, Blackwell Publishing, vol. 50(1), pages 99-110, January. [Downloadable!] (restricted)
  10. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January. [Downloadable!] (restricted)
  11. Fortin, B. & Lacroix, G., 1993. "A Test of the Neoclassical and Collective Models of Household Labour Supply," Papers 9335, Laval - Recherche en Politique Economique.
  12. James Andreoni & William T. Harbaugh, 2006. "Power Indices for Revealed Preference Tests," Levine's Bibliography 122247000000001257, UCLA Department of Economics. [Downloadable!]
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  13. Cherchye, Laurens & Vermeulen, Frederic, 2006. "Nonparametric analysis of household labor supply: goodness-of-fit and power of the unitary and the collective model," Discussion Paper 13, Tilburg University, Center for Economic Research. [Downloadable!]
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  14. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
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  15. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July. [Downloadable!] (restricted)
  16. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  17. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guy Lacroix & Natalia Radtchenko, 2008. "The Changing Intra-Household Resource Allocation in Russia," Cahiers de recherche 0811, CIRPEE. [Downloadable!]
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  2. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vermeulen, 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: an Integer Programming Procedure," ECARES Working Papers 2008_001, Université Libre de Bruxelles, Ecares. [Downloadable!]
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