The measurement of household cost functions: Revealed preference versus subjective measures
AbstractSince the work of Pollak and Wales (1979), it is well-known that demand data are insufficient to identify a household cost function. Hence additional information is required. For that purpose I propose to employ direct measurement of feelings of well-being, elicited in surveys. In the paper I formally establish the connection between subjective measures and the cost function underlying the AID system. The subjective measures fully identify cost functions and the expenditure data do this partly. This makes it possible to test the null hypothesis that both types of data are consistent with one another, i.e. that they measure the same thing. I use two separate data sets to set up a test of this equivalence. The outcomes are somewhat mixed and indicate the need for further specification search. Finally, I discuss some implications of the outcomes.
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-364386.
Date of creation: 1994
Date of revision:
Publication status: Published in Journal of Population Economics (1994) v.7, p.333-350
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Web page: http://www.tilburguniversity.edu/
Other versions of this item:
- Kapteyn, Arie, 1994. "The Measurement of Household Cost Functions: Revealed Preference versus Subjective Measures," Journal of Population Economics, Springer, vol. 7(4), pages 333-50, November.
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