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Nonparametric tests of collectively rational consumption behavior: An integer programming procedure

  • Cherchye, Laurens
  • De Rock, Bram
  • Sabbe, Jeroen
  • Vermeulen, Frederic

We present an IP-based nonparametric (revealed preference) testing procedure for rational consumption behavior in terms of a general collective model, which includes consumption externalities and public consumption. An empirical application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the practical usefulness of the procedure. Finally, we present extensions of the testing procedure to evaluate the goodness-of-fit (accounting for optimization error as well as measurement error) of the collective model subject to testing.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 147 (2008)
Issue (Month): 2 (December)
Pages: 258-265

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Handle: RePEc:eee:econom:v:147:y:2008:i:2:p:258-265
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  8. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2007. "The Revealed Preference Approach to Collective Consumption Behavior: Testing, Recovery and Welfare Analysis," IZA Discussion Papers 3062, Institute for the Study of Labor (IZA).
  9. 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.
  10. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2005. "Opening the Black Box of Intra-Household Decision-Making: Theory and Non-Parametric Empirical Tests of General Collective Consumption Models," IZA Discussion Papers 1603, Institute for the Study of Labor (IZA).
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  12. Cherchye, L.J.H. & de Rock, B. & Sabbe, J. & Vermeulen, F.M.P., 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior : An Integer Programming Procedure," Discussion Paper 2008-2, Tilburg University, Center for Economic Research.
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  17. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
  18. 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.
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