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Opening the black box of intrahousehold decision making: theory and nonparametric empirical tests of general collective consumption models

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  • Laurens Cherchye
  • Bram De Rock
  • Frederic Vermeulen

Abstract

We non-parametrically test a general collective consumption model with public consumption and externalities inside the household.We further propose a novel approach to model special cases of the general collective model.These special cases include alternative restrictions on the 'sharing rule' that applies to each household, and which defines the distribution of the household budget over the household members.A limiting case is the unitary model.Our application uses data from the Russia Longitudinal Monitoring Survey (RLMS); the panel structure of this data set allows non-parametric testing of the behavioral models without relying on preference homogeneity assumptions across similar individuals.This application includes test results but also a power analysis for different specifications of the collective consumption model.Our main findings are that the most general collective model, together with a large class of special but still fairly general cases, cannot be rejected by the data, while other restricted versions of the general model, including the unitary alternative, are rejected.Since these tests are entirely non-parametric, this provides strong evidence in favor of models focusing on intra-household decisionmaking.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/98561.

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Date of creation: 2009
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Publication status: Published in: Journal of political economy (2009) v.117 n° 6,p.1074-1104
Handle: RePEc:ulb:ulbeco:2013/98561

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  1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03.
  2. Fortin, B. & Lacroix, G., 1993. "A Test of the Neoclassical and Collective Models of Household Labour Supply," Papers 9335, Laval - Recherche en Politique Economique.
  3. Martin Browning & Pierre-Andrée Chiappori & Arthur Lewbel, 2004. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Boston College Working Papers in Economics 588, Boston College Department of Economics, revised 01 Sep 2010.
  4. Vermeulen, F.M.P., 2005. "And the winner is..... An empirical evaluation of unitary and collective labour supply models," Open Access publications from Tilburg University urn:nbn:nl:ui:12-194165, Tilburg University.
  5. Varian, Hal R, 1983. "Non-Parametric Tests of Consumer Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 50(1), pages 99-110, January.
  6. 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.
  7. 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.
  8. Richard Blundell & Martin Browning & Ian Crawford, 2002. "Nonparametric Engel Curves and Revealed Preference," CAM Working Papers 2002-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  9. James Andreoni & William T. Harbaugh, 2006. "Power Indices for Revealed Preference Tests," Levine's Bibliography 122247000000001257, UCLA Department of Economics.
  10. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
  11. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best nonparametric bounds on demand responses," CeMMAP working papers CWP12/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  12. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  13. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  14. Susan K. Snyder, 2000. "Nonparametric Testable Restrictions of Household Behavior," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 171-185, July.
  15. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
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