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Economic well-being and poverty among the elderly: an analysis based on a collective consumption model

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  • Laurens Cherchye
  • Bram De Rock
  • Frederic Vermeulen

Abstract

We apply the collective consumption model of Browning, Chiappori and Lewbel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife’s share that is increasing in total expenditures. We further calculated poverty rates by means of the collective consumption model. Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overestimated) by the traditional approach. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband’s death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/131702.

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Date of creation: 2012
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Publication status: Published in: European economic review (2012) v.56 n° 6,p.985–1000
Handle: RePEc:ulb:ulbeco:2013/131702

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References

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  1. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, . "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," CAM Working Papers 2003-12, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Dec 2003.
  2. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc.
  3. Vermeulen, F.M.P., 2002. "Collective household models: Principles and main results," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3106943, Tilburg University.
  4. Coder, John & Rainwater, Lee & Smeeding, Timothy M, 1989. "Inequality among Children and Elderly in Ten Modern Nations: The United States in an International Context," American Economic Review, American Economic Association, vol. 79(2), pages 320-24, May.
  5. Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
  6. Pierre-André Chiappori & Richard Blundell & Costas Meghir, 2002. "Collective labour supply with children," IFS Working Papers W02/08, Institute for Fiscal Studies.
  7. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  8. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  9. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers 92-23, DELTA (Ecole normale supérieure).
  10. Lewbel, Arthur, 2003. "Calculating compensation in cases of wrongful death," Journal of Econometrics, Elsevier, vol. 113(1), pages 115-128, March.
  11. Laurens Cherchye & Frederic Vermeulen, 2003. "Nonparametric Analysis of Household Labour Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model," Public Economics Working Paper Series ces0302, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  12. Blundell, Richard & Robin, Jean Marc, 1999. "Estimation in Large and Disaggregated Demand Systems: An Estimator for Conditionally Linear Systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 209-32, May-June.
  13. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2007. "The collective model of household consumption: A nonparametric characterization," Open Access publications from Tilburg University urn:nbn:nl:ui:12-194157, Tilburg University.
  14. Michael Hurd & Susann Rohwedder, 2006. "Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS," Working Papers 410, RAND Corporation Publications Department.
  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.
  16. 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.
  17. Lundberg, S.J. & Pollak, R.A. & Wales, T.J., 1994. "Do Husbands and Wives Pool Their Resources? Evidence from U.K. Child Benefit," Discussion Papers in Economics at the University of Washington 94-6, Department of Economics at the University of Washington.
  18. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  19. Karen Holden & Richard Burkhauser & Daniel Feaster, 1988. "The timing of falls into poverty after retirement and widowhood," Demography, Springer, vol. 25(3), pages 405-414, August.
  20. François Bourguignon & Martin Browning & Pierre-André Chiappori, 2006. "Efficient Intra-household Allocations and Distribution Factors: Implications and Identification," CAM Working Papers 2006-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  21. Smeeding, Timothy M & Sullivan, Dennis H, 1998. "Generations and the Distribution of Economic Well-Being: A Cross-National View," American Economic Review, American Economic Association, vol. 88(2), pages 254-58, May.
  22. Angus Deaton & Christina Paxson, 1995. "Measuring Poverty Among the Elderly," NBER Working Papers 5296, National Bureau of Economic Research, Inc.
  23. Fran�Ois Bourguignon & Martin Browning & Pierre-Andr� Chiappori, 2009. "Efficient Intra-Household Allocations and Distribution Factors: Implications and Identification," Review of Economic Studies, Wiley Blackwell, vol. 76(2), pages 503-528, 04.
  24. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
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Citations

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Cited by:
  1. Laurens CHERCHYE & Bram DE ROCK & Arthur LEWBEL & Frederic VERMEULEN, 2012. "Sharing rule identification for general collective consumption models," Center for Economic Studies - Discussion papers ces12.05, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Dekkers, Gijs, 2008. "Are the old poor? A discussion and some cursory evidence," MPRA Paper 29436, University Library of Munich, Germany.
  3. Martina Menon & Federico Perali & Luca Piccoli, 2008. "The passive drinking effect: Evidence from Italy," Working Papers halshs-00586686, HAL.
  4. Bütikofer, Aline & Gerfin, Michael, 2009. "The Economies of Scale of Living Together and How They Are Shared: Estimates Based on a Collective Household Model," IZA Discussion Papers 4327, Institute for the Study of Labor (IZA).
  5. Bargain, Olivier & Donni, Olivier, 2009. "Revisiting the cost of children : theory and evidence from Ireland," Open Access publications from University College Dublin urn:hdl:10197/2014, University College Dublin.
  6. Lucia Mangiavacchi & Luca Piccoli, 2009. "Child welfare and intra-household inequality in Albania," Working Papers 149, ECINEQ, Society for the Study of Economic Inequality.
  7. Hélène Couprie & Gaëlle Ferrant, 2012. "Welfare Comparisons, Economies of Scale and Equivalence Scale in Time Use," THEMA Working Papers 2012-43, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  8. 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.

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