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The economies of scale of living together and how they are shared - Estimates based on a collective household model

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Author Info
Aline Bütikofer
Michael Gerfin

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Abstract

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives contribution to household income and the duration of the relationship.

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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0903.

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Date of creation: Jul 2009
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Handle: RePEc:ube:dpvwib:dp0903

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Related research
Keywords: Collective Household Models; Sharing Rule; Equivalence Scale; Subjective data;

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Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
D19 - Microeconomics - - Household Behavior - - - Other

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  1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "Economic Well-being and Poverty among the Elderly: an Analysis Based on a Collective Consumption Model," ECARES Working Papers 2008_026, Université Libre de Bruxelles, Ecares. [Downloadable!]
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  2. Valerie Lechene & Orazio Attanasio, 2002. "Tests of Income Pooling in Household Decisions," Economics Series Working Papers 106, University of Oxford, Department of Economics.
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  3. Jeremy Lise & Shannon Seitz, 2005. "Consumption Inequality and Intra-Household Allocations," Labor and Demography 0504001, EconWPA. [Downloadable!]
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  4. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
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  5. 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.
  6. Arthur Lewbel & Krishna Pendakur, 2008. "Estimation of Collective Household Models With Engel Curves," Boston College Working Papers in Economics 694, Boston College Department of Economics. [Downloadable!]
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  7. Jennifer Ward-Batts, 2008. "Out of the Wallet and into the Purse: Using Micro Data to Test Income Pooling," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 325-351. [Downloadable!] (restricted)
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  8. Yiguo Sun & Thanasis Stengos & Dianqin Wang, 2006. "Estimates of semiparametric equivalence scales," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 629-639. [Downloadable!]
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  9. Munro, Alistair, 2005. "Household willingness to pay equals individual willingness to pay if and only if the household income pools," Economics Letters, Elsevier, vol. 88(2), pages 227-230, August. [Downloadable!] (restricted)
  10. Martin Browning & Pierre-André Chiappori & Valérie Lechene, 2006. "Collective and Unitary Models: A Clarification," Review of Economics of the Household, Springer, vol. 4(1), pages 5-14, 03. [Downloadable!] (restricted)
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  11. Jens Bonke & Martin Browning, 2009. "The distribution of financial well-being and income within the household," Review of Economics of the Household, Springer, vol. 7(1), pages 31-42, March. [Downloadable!] (restricted)
  12. Charlier, Erwin, 2002. "Equivalence Scales in an Intertemporal Setting with an Application to the Former West Germany," Review of Income and Wealth, Blackwell Publishing, vol. 48(1), pages 99-126, March. [Downloadable!] (restricted)
  13. Jens Bonke & Hans Uldall-Poulsen, 2007. "Why do families actually pool their income? Evidence from Denmark," Review of Economics of the Household, Springer, vol. 5(2), pages 113-128, June. [Downloadable!] (restricted)
  14. Bernard M.S. van Praag & Ada Ferrer-i-Carbonell, 2006. "An Almost Integration-free Approach to Ordered Response Models," Tinbergen Institute Discussion Papers 06-047/3, Tinbergen Institute. [Downloadable!]
  15. Fortin, Bernard & Lacroix, Guy, 1997. "A Test of the Unitary and Collective Models of Household Labour Supply," Economic Journal, Royal Economic Society, vol. 107(443), pages 933-55, July. [Downloadable!] (restricted)
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