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The economies of scale of living together and how they are shared: estimates based on a collective household model

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  • Aline Bütikofer

    (Norwegian School of Economics)

  • Michael Gerfin

    (University of Bern
    IZA)

Abstract

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales which assume equal sharing of resources within the household. Recent evidence based on collective household models rejects this equal sharing assumption. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economies of scale in a collective household model. The estimates indicate substantial scale economies of living together. Furthermore, wives receive on average almost 50 % of household resources, but the estimated shares vary between 30 and 60 %. Female resource shares increase with the ratio of female to male wages. Consumption inequality is underestimated by 16 % if unequal sharing is ignored.

Suggested Citation

  • Aline Bütikofer & Michael Gerfin, 2017. "The economies of scale of living together and how they are shared: estimates based on a collective household model," Review of Economics of the Household, Springer, vol. 15(2), pages 433-453, June.
  • Handle: RePEc:kap:reveho:v:15:y:2017:i:2:d:10.1007_s11150-014-9255-8
    DOI: 10.1007/s11150-014-9255-8
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    Cited by:

    1. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    2. Daniel Burkhard, 2017. "Allocation of Expenditures in Elderly Households and the Cost of Widowhood," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 153(4), pages 371-401, October.
    3. Melanie Borah, 2020. "Estimating Extended Income Equivalence Scales from Income Satisfaction and Time Use Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(2), pages 687-718, June.
    4. Amy Farmer & Andrew Horowitz, 2015. "Strategic non-marital cohabitation: theory and empirical implications," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(1), pages 219-237, January.
    5. Botha, Ferdi & Ribar, David C., 2020. "For Worse? Financial Hardships and Intra-Household Resource Allocation among Australian Couples," IZA Discussion Papers 13935, Institute of Labor Economics (IZA).
    6. Fernando Alexandre & Pedro Bação & Miguel Portela, 2020. "Is the basic life-cycle theory of consumption becoming more relevant? Evidence from Portugal," Review of Economics of the Household, Springer, vol. 18(1), pages 93-116, March.
    7. Menon, Martina & Pendakur, Krishna & Perali, Federico, 2012. "On the expenditure-dependence of children’s resource shares," Economics Letters, Elsevier, vol. 117(3), pages 739-742.

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    More about this item

    Keywords

    Collective household models; Sharing rule; Equivalence scale; Subjective data;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D19 - Microeconomics - - Household Behavior - - - Other

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