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Collective Household Consumption Behavior: Revealed Preference Analysis

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

Abstract

We review a nonparametric "revealed preference" methodology for analyzing collective consumption behavior in practical applications. The methodology allows for accounting for externalities, public consumption, and the use of assignable quantity information in the consumption analysis. This provides a framework for empirically assessing welfare-related questions that are specific to the collective model of household consumption. As a first step, we discuss the testable necessary and sufficient conditions for data consistency with special cases of the collective model (e.g., the case with all goods publicly consumed, and the case with all goods privately consumed without externalities); these conditions can be checked by means of mixed integer (linear) programming (MIP) solution algorithms. Next, we focus on a testable necessary condition for the most general model in our setting (i.e., the case in which any good can be publicly consumed as well as privately consumed, possibly with externalities); again, this condition can be checked by means of MIP solution algorithms. Even though this general model imposes minimal structure a priori , we show that the MIP characterization allows for deriving bounds on the feasible income shares. Finally, we illustrate our methods by some empirical applications to data drawn from the Russian Longitudinal Monitoring Survey.

Suggested Citation

  • Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2012. "Collective Household Consumption Behavior: Revealed Preference Analysis," Foundations and Trends(R) in Econometrics, now publishers, vol. 4(4), pages 225-312, March.
  • Handle: RePEc:now:fnteco:0800000016
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    File URL: http://dx.doi.org/10.1561/0800000016
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    Cited by:

    1. repec:spr:etbull:v:3:y:2015:i:2:d:10.1007_s40505-014-0053-5 is not listed on IDEAS
    2. Nikolay Klemashev & Alexander Shananin, 2015. "Positively-homogeneous Konus-Divisia indices and their applications to demand analysis and forecasting," Papers 1501.05771, arXiv.org.
    3. Bart Smeulders & Laurens Cherchye & Bram Rock & Frits C. R. Spieksma & Fabrice Talla Nobibon, 2015. "Transitive preferences in multi-member households," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 243-254, October.

    More about this item

    Keywords

    Household consumption; Collective model; Revealed preferences; Nonparametric recovery; Integer programming; Labor Economics; Econometrics; Consumer and Household Economics;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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