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Nonparametric Analysis of Household Labour Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model

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Laurens Cherchye ()
Frederic Vermeulen ()

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Abstract

We compare the empirical performance of the unitary and the collective approach to modelling observed labour supply behaviour. Deviating from the mainstream literature, we conduct a nonparametric analysis, which avoids the distortive impact of an erroneously specified functional form for the preferences and/or the intrahousehold bargaining process. Our analysis specifically focuses on the goodness-of-fit of the two behavioural models. To guarantee a fair comparison, we complement this goodness-of-fit analysis with a power analysis. Our results strongly favour the collective approach to modelling the behaviour of multi-person households. More generally, they illustrate the usefulness of nonparametric testing tools for the empirical evaluation of theoretical behavioural models.

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ces0302.

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Length: 19 pp.
Date of creation: 2003
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Handle: RePEc:wpe:papers:ces0302

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June. [Downloadable!] (restricted)
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  2. Cherchye, L. & Rock, B. de & Vermeulen, F.M.P., 2004. "The collective model of household consumption : a nonparametric characterization," Discussion Paper 76, Tilburg University, Center for Economic Research. [Downloadable!]
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  3. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July. [Downloadable!] (restricted)
  4. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-78, July. [Downloadable!] (restricted)
  5. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1. [Downloadable!] (restricted)
  6. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140. [Downloadable!] (restricted)
  7. Frederic Vermeulen, 2005. "And the winner is... An empirical evaluation of unitary and collective labour supply models," Empirical Economics, Springer, vol. 30(3), pages 711-734, October. [Downloadable!] (restricted)
  8. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December. [Downloadable!] (restricted)
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  9. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February. [Downloadable!] (restricted)
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  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.
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  11. Susan K. Snyder, 2000. "Nonparametric Testable Restrictions of Household Behavior," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 171-185, July.
  12. Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-72, June. [Downloadable!] (restricted)
  13. Famulari, Melissa, 1995. "A Household-Based, Nonparametric Test of Demand Theory," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 372-82, May. [Downloadable!] (restricted)
  14. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier. [Downloadable!] (restricted)
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  15. Hal R. Varian, 1994. "Goodness-of-Fit for Revealed Preference Tests," Econometrics 9401001, EconWPA. [Downloadable!]
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  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. [Downloadable!] (restricted)
  17. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January. [Downloadable!] (restricted)
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  1. Michaud, P.C. & Vermeulen, F.M.P., 2004. "A collective retirement model : identification and estimation in the presence of externalities," Discussion Paper 75, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Cherchye, L. & Rock, B. de & Vermeulen, F.M.P., 2008. "Economic Well-Being and Poverty Among the Elderly: An Analysis Based on a Collective Consumption Model," Discussion Paper 2008-15, Tilburg University, Center for Economic Research. [Downloadable!]
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  3. Boone, Jan & van der Wiel, Karen & Vermeulen, Frederic, 2009. "Kinky Choices, Dictators and Split Might: A Non-Cooperative Model for Household Consumption and Labor Supply," IZA Discussion Papers 4272, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vermeulen, 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: an Integer Programming Procedure," ECARES Working Papers 2008_001, Université Libre de Bruxelles, Ecares. [Downloadable!]
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  5. Cherchye, L. & Rock, B. de & Vermeulen, F.M.P., 2004. "The collective model of household consumption : a nonparametric characterization," Discussion Paper 76, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. Cherchye, Laurens & Rock, Bram de & Vermeulen, Frederic, 2005. "Opening the black box of intra-household decision-making: theory and non-parametric empirical tests of general collective consumption models," Discussion Paper 51, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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