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Private versus public consumption within groups: testing the nature of goods from aggregate data

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  • Laurens Cherchye
  • Bram De Rock
  • Vincenzo Platino

Abstract

We study the testability implications of public versus private consumption. The distinguishing feature of our approach is that we start from a revealed preference characterization of collectively rational behavior. Remarkably, we find that assumptions regarding the public or private nature of specific goods do have testability implications, even if one only observes the aggregate group consumption. In fact, these testability implications apply as soon as the analysis includes three goods and four obervations. This stands in sharp contrast with existing results that start from a differential characterization of collectively rational behavior. In our opinion, our revealed preference approach obtains stronger testability conclusions because it focuses on a global characterization of collective rationality, whereas the differential approach starts from a local characterization.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/131703.

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Date of creation: 2012
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Publication status: Forthcoming
Handle: RePEc:ulb:ulbeco:2013/131703

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  1. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2008. "An Afriat Theorem for the Collective Model of Household Consumption," Discussion Paper, Tilburg University, Center for Economic Research 2008-72, Tilburg University, Center for Economic Research.
  2. Hans Gersbach & Hans Haller, 2004. "When Inefficiency Begets Efficiency," CESifo Working Paper Series 1197, CESifo Group Munich.
  3. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
  4. Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
  5. 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.
  6. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2011. "The revealed preference approach to collective consumption behavior: Testing and sharing rule recovery," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3857700, Tilburg University.
  7. Sabrina Bruyneel & Laurens Cherchye & Bram De Rock, 2012. "Collective consumption models with restricted bargaining weights: an empirical assessment based on experimental data," Review of Economics of the Household, Springer, Springer, vol. 10(3), pages 395-421, September.
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  10. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers, DELTA (Ecole normale supérieure) 89-07, DELTA (Ecole normale supérieure).
  11. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, Elsevier, vol. 130(1), pages 1-26, September.
  12. Cherchye, L.J.H. & Rock, B. de & Sabbe, J. & Vermeulen, F.M.P., 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure," Discussion Paper, Tilburg University, Center for Economic Research 2008-2, Tilburg University, Center for Economic Research.
  13. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  14. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 945-73, July.
  15. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1539-1545, December.
  16. William Harbaugh & Kate Krause & Timothy Berry, 2001. "Garp for kids: On the development of rational choice behavior," Artefactual Field Experiments, The Field Experiments Website 00056, The Field Experiments Website.
  17. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(444), pages 1431-44, September.
  18. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, Econometric Society, vol. 77(3), pages 763-799, 05.
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