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Estimation of Collective Household Models With Engel Curves

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  • Arthur Lewbel

    (Boston College)

  • Krishna Pendakur

    (Simon Fraser University)

Abstract

The structural consumer demand methods used to estimate the parameters of collective household models are typically either very restrictive and easy to implement or very general and difficult to estimate. In this paper, we provide a middle ground. We adapt the very general framework of Browning, Chiappori and Lewbel (2007) by adding a simple restriction that recasts the empirical model from a highly nonlinear demand system with price variation to a slightly nonlinear Engel curve system. Our restriction has an interpretation in terms of the behaviour of household scale economies and is testable. Our method identifies the levels of (not just changes in) household resource shares, and a variant of equivalence scales called indifference scales. We apply our methodology to Canadian expenditure data.

Suggested Citation

  • Arthur Lewbel & Krishna Pendakur, 2008. "Estimation of Collective Household Models With Engel Curves," Boston College Working Papers in Economics 694, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:694
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    References listed on IDEAS

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    1. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
    2. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, 2013. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1267-1303.
    3. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2012. "Economic well-being and poverty among the elderly: An analysis based on a collective consumption model," European Economic Review, Elsevier, vol. 56(6), pages 985-1000.
    4. Jeremy Lise & Shannon Seitz, 2011. "Consumption Inequality and Intra-household Allocations," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 328-355.
    5. Vermeulen, Frederic, 2002. "Collective Household Models: Principles and Main Results," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 533-564, September.
    6. 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.
    7. Becker, Gary S, 1981. "Altruism in the Family and Selfishness in the Market Place," Economica, London School of Economics and Political Science, vol. 48(189), pages 1-15, February.
    8. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    9. 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 1067-1096, December.
    10. Lewbel, Arthur, 1989. "Household equivalence scales and welfare comparisons," Journal of Public Economics, Elsevier, vol. 39(3), pages 377-391, August.
    11. Chiappori, Pierre-Andre, 1988. "Nash-Bargained Households Decisions: A Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 791-796, November.
    12. Jorgenson, Dale W & Slesnick, Daniel T, 1987. "Aggregate Consumer Behavior and Household Equivalence Scales," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 219-232, April.
    13. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
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    More about this item

    Keywords

    Consumer Demand; Collective Model; Sharing rule; Household Bargaining; Bargaining Power; Indifference Scales; Adult Equivalence Scales; Demand Systems; Barten Scales; Nonparametric Identification.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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