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Nonparametric Analysis of Household Labor Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model

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  • Cherchye, Laurens

    ()
    (K.U.Leuven)

  • Vermeulen, Frederic

    ()
    (Tilburg University)

Abstract

We compare the empirical performance of unitary and collective labor supply models, using representative data from the Dutch DNB Household Survey. We conduct a nonparametric analysis that avoids the distortive impact of an erroneously specified functional form for the preferences and/or the intrahousehold bargaining process. Our analysis focuses on the goodness-of-fit of the two behavioral models. To guarantee a fair comparison, we complement this goodness-of-fit analysis with a power analysis. Our results strongly favor the collective approach to modeling the behavior of multi-person households.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2004.

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Length: 20 pages
Date of creation: Mar 2006
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2008, 90 (2), 267-274
Handle: RePEc:iza:izadps:dp2004

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Keywords: nonparametric analysis; unitary model; collective model; labor supply; revealed preferences;

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References

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  1. Frederic Vermeulen, 2005. "And the winner is... An empirical evaluation of unitary and collective labour supply models," Empirical Economics, Springer, Springer, vol. 30(3), pages 711-734, October.
  2. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A nonparametric characterization," ULB Institutional Repository 2013/98559, ULB -- Universite Libre de Bruxelles.
  3. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, Elsevier, vol. 46(1-2), pages 125-140.
  4. Pierre-André Chiappori & Bernard Fortin & Guy Lacroix, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," CIRANO Working Papers, CIRANO 2001s-16, CIRANO.
  5. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers, DELTA (Ecole normale supérieure) 89-07, DELTA (Ecole normale supérieure).
  6. Hal R. Varian, 1994. "Goodness-of-Fit for Revealed Preference Tests," Econometrics, EconWPA 9401001, EconWPA.
  7. Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-72, June.
  8. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers, DELTA (Ecole normale supérieure) 92-23, DELTA (Ecole normale supérieure).
  9. Browning, M. & Chiappori, P.A., 1994. "Efficient Intra-Household allocations: A General Characterization and Empirical Tests," DELTA Working Papers, DELTA (Ecole normale supérieure) 94-16, DELTA (Ecole normale supérieure).
  10. Famulari, Melissa, 1995. "A Household-Based, Nonparametric Test of Demand Theory," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 372-82, May.
  11. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 1.
  12. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
  13. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers, Institute for Fiscal Studies W98/18, Institute for Fiscal Studies.
  14. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 945-73, July.
  15. Fortin, Bernard & Lacroix, Guy, 1997. "A Test of the Unitary and Collective Models of Household Labour Supply," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(443), pages 933-55, July.
  16. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(443), pages 1054-78, July.
  17. Susan K. Snyder, 2000. "Nonparametric Testable Restrictions of Household Behavior," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 171-185, July.
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