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Allocation of Expenditures in Elderly Households and the Cost of Widowhood

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  • Daniel Burkhard

Abstract

Widowhood and retirement are likely to change the economic environment of elderly households. While retirement primarily changes income and expenditure patterns, widowhood fundamentally changes the structure of the household. Beside high non-monetary cost of losing the partner, resources are no longer shared and economies of scale arising from joint consumption are lost. This paper applies the Lewbel and Pendakur (2008) collective household model to expenditure data on elderly households in Switzerland. The findings suggest that between 40 and 50% of household resources are assigned to wives and both spouses save approximately 25% on expenditures due to economies of scale in consumption. Widowers tend to have higher wealth than widows. Estimates of indifference scales, however, indicate that the financial loss related to widowhood is larger for men than for women. Moreover, ignoring within household inequality, as implicitly done by traditional equivalence scales, underestimates total inequality among individuals.

Suggested Citation

  • Daniel Burkhard, 2015. "Allocation of Expenditures in Elderly Households and the Cost of Widowhood," Diskussionsschriften dp1503, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1503
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    Cited by:

    1. Alexander Wolf, 2016. "Resource Allocation in Couples. A Collective Model with Prior Information," Working Papers ECARES ECARES 2016-37, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Collective Household Model; Indifference Scale; Resource Shares; Economies of Scale in Consumption; Demand System Estimation; Engel Curves; Elderly Households;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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