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Sharing rule identification for general collective consumption models

  • Laurens CHERCHYE
  • Bram DE ROCK
  • Arthur LEWBEL
  • Frederic VERMEULEN

We propose a method to identify bounds (i.e. set identification) on the sharing rule for a general collective household consumption model. Unlike the effects of distribution factors, it is well known that the level of the sharing rule cannot be uniquely identified without strong assumptions on preferences across households of different compositions. Our new results show that, though not point identified without these assumptions, bounds on the sharing rule can still be obtained. We get these bounds by applying revealed preference restrictions implied by the collective model to the household’s continuous aggregate demand functions. We obtain informative bounds even if nothing is known about whether each good is public, private, or assignable within the household, though having such information tightens the bounds. An empirical application demonstrates the practical usefulness of our method.

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces12.05.

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Date of creation: May 2012
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Handle: RePEc:ete:ceswps:ces12.05
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  21. Marjorie B. McElroy, 1990. "The Empirical Content of Nash-Bargained Household Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 559-583.
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  34. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The revealed preference approach to collective consumption behavior: nonparametric testing and sharing rule recovery," ULB Institutional Repository 2013/98560, ULB -- Universite Libre de Bruxelles.
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