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

  • Laurens Cherchye
  • Bram De Rock
  • Jeroen Sabbe
  • Frederic Vemeulen

We present an IP-based nonparametric (revealed preference) testing procedure for rational consumption behavior in terms of general collective models, which include 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 of the collective model subject to testing, and to quantify and improve the power of the corresponding collective rationality tests.

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File URL: http://feb.kuleuven.be/drc/Economics/research/old-dps-papers/Dps08/Dps0801.pdf
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Paper provided by KU Leuven, Faculty of Economics and Business, Department of Economics in its series Working Papers Department of Economics with number ces0801.

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Date of creation: Mar 2008
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Handle: RePEc:ete:ceswps:ces0801
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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  1. R. Blundell & Jean-Marc Robin, 2000. "Latent separability: grouping goods without weak separability," Sciences Po publications info:hdl:2441/f0uohitsgqh, Sciences Po.
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  4. Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
  5. 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.
  6. James Andreoni & William Harbaugh, 2005. "Power Indicies for Revealed Preference Tests," Levine's Bibliography 784828000000000181, UCLA Department of Economics.
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  8. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
  9. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2009. "Opening the black box of intra-household decision-making : Theory and non-parametric empirical tests of general collective consumption models," Other publications TiSEM bc6d0cf7-c686-40a4-84f4-9, Tilburg University, School of Economics and Management.
  10. Mette Christensen, 2007. "Integrability of demand accounting for unobservable heterogeneity: a test on panel data," IFS Working Papers W07/14, Institute for Fiscal Studies.
  11. 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.
  12. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vemeulen, 2008. "Nonparametric tests of collectively rational consumption behavior: an integer programming procedure," Working Papers Department of Economics ces0801, KU Leuven, Faculty of Economics and Business, Department of Economics.
  13. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  14. Richard Blundell & Martin Browning & Ian Crawford, 1998. "Nonparametric Engel Curves and Revealed Preference," Discussion Papers 99-07, University of Copenhagen. Department of Economics.
  15. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  16. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best Nonparametric Bounds on Demand Responses," CAM Working Papers 2005-16, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  17. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  18. Laurens CHERCHYE & Bram DE ROCK & Frederic VERMEULEN, 2007. "The revealed preference approach to collective consumption behavior: testing, recovery and welfare analysis," Working Papers Department of Economics ces0724, KU Leuven, Faculty of Economics and Business, Department of Economics.
  19. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
  20. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
  21. Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-72, June.
  22. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September.
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