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Resource Allocation in Couples. A Collective Model with Prior Information

Listed author(s):
  • Alexander Wolf

This paper approaches, for the first time, the estimation of a collective household demand system from a Bayesian perspective. Using prior information on equivalence scales, as well as restrictions implied by theory, tight credible intervals are found for resource shares, a measure of the distribution of economic well-being in a household. A modern MCMC sampling method provides a complete picture of the high-dimensional parameter vector's posterior distribution and allows for reliable inference. The share of household earnings generated by a household member is estimated to have a positive effect on her share of household resources in a sample of couples from the US Consumer Expenditure survey. An increase in the earnings share of one percentage point is estimated to result in a shift of between 0:05% and 0:14% of household resources in the same direction, meaning that spouses partially insure one another against such shifts. The estimates imply an expected shift of 0:71% of household resources from the average man to the average woman in the same sample between 2008 and 2012, when men lost jobs at a greater rate than women.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2016-37.

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Length: 20 p.
Date of creation: Nov 2016
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/239580
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  1. 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.
  2. Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, August.
  3. 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.
  4. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2012. "Married with Children: A Collective Labor Supply Model with Detailed Time Use and Intrahousehold Expenditure Information," American Economic Review, American Economic Association, vol. 102(7), pages 3377-3405, December.
  5. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
  6. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  7. Daniel Burkhard, 2015. "Allocation of Expenditures in Elderly Households and the Cost of Widowhood," Diskussionsschriften dp1503, Universitaet Bern, Departement Volkswirtschaft.
  8. Geoffrey R. Dunbar & Arthur Lewbel & Krishna Pendakur, 2013. "Children's Resources in Collective Households: Identification, Estimation, and an Application to Child Poverty in Malawi," American Economic Review, American Economic Association, vol. 103(1), pages 438-471, February.
  9. Maurizio Mazzocco, 2007. "Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 857-895.
  10. Denni Tommasi & Alexander Wolf, 2016. "Overcoming Weak Identification in the Estimation of Household Resource Shares," Working Papers ECARES ECARES 2016-12, ULB -- Universite Libre de Bruxelles.
  11. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  12. Lewbel, Arthur & Pendakur, Krishna, 2008. "Estimation of collective household models with Engel curves," Journal of Econometrics, Elsevier, vol. 147(2), pages 350-358, December.
  13. Lazear, Edward P & Michael, Robert T, 1980. "Family Size and the Distribution of Real Per Capita Income," American Economic Review, American Economic Association, vol. 70(1), pages 91-107, March.
  14. Shelly Lundberg & Robert Pollak, 2003. "Efficiency in Marriage," Review of Economics of the Household, Springer, vol. 1(3), pages 153-167, September.
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