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Private versus public consumption within groups : testing the nature of goods from aggregate data

  • Laurens Cherchye

    ()

    (Center for Economic Studies - Department of Economics, CentER - Tilburg University)

  • Bram De Rock

    ()

    (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université Libre de Bruxelles, ECORE - ULB - Université Libre de Bruxelles)

  • Vincenzo Platino

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

We study the testability implications of public versus private consumption. The distinguishing feature of our approach is that we start from a revealed preference characterization of collectively rational behavior. Remarkably, we find that assumptions regarding the public or private nature of specific goods do have testability implications, even if one only observes the aggregate group consumption. In fact, these testability implications apply as soon as the analysis includes three goods and four obervations. This stands in sharp contrast with existing results that start from a differential characterization of collectively rational behavior. In our opinion, our revealed preference approach obtains stronger testability conclusions because it focuses on a global characterization of collective rationality, whereas the differential approach starts from a local characterization.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00543999.

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Date of creation: Aug 2010
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Handle: RePEc:hal:cesptp:halshs-00543999
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00543999
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  1. Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
  2. Pollak, R.A., 1990. "Distinguished Floow: Houthakker'S Contributions To Economics," Working Papers 90-06, University of Washington, Department of Economics.
  3. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2008. "An Afriat Theorem for the Collective Model of Household Consumption," IZA Discussion Papers 3794, Institute for the Study of Labor (IZA).
  4. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2011. "The revealed preference approach to collective consumption behavior : Testing and sharing rule recovery," Other publications TiSEM 11c788ab-cf82-4759-a6a8-3, Tilburg University, School of Economics and Management.
  5. Gersbach, Hans & Haller, Hans, 2003. "When Inefficiency Begets Efficiency," Economics Series 128, Institute for Advanced Studies.
  6. 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.
  7. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, vol. 77(3), pages 763-799, 05.
  8. Kate Krause & Timothy Berry & William Harbaugh, 2001. "Garp for kids: On the development of rational choice behavior," Artefactual Field Experiments 00056, The Field Experiments Website.
  9. Anna Fostel & Herbert E. Scarf & Michael J. Todd, 2003. "Two New Proofs of Afriat's Theorem," Cowles Foundation Discussion Papers 1415, Cowles Foundation for Research in Economics, Yale University.
  10. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  11. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A nonparametric characterization," ULB Institutional Repository 2013/98559, ULB -- Universite Libre de Bruxelles.
  12. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  13. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, vol. 91(5), pages 1539-1545, December.
  14. Cherchye, Laurens & De Rock, Bram & Sabbe, Jeroen & Vermeulen, Frederic, 2008. "Nonparametric tests of collectively rational consumption behavior: An integer programming procedure," Journal of Econometrics, Elsevier, vol. 147(2), pages 258-265, December.
  15. Sabrina Bruyneel & Laurens Cherchye & Bram De Rock, 2012. "Collective consumption models with restricted bargaining weights: an empirical assessment based on experimental data," Review of Economics of the Household, Springer, vol. 10(3), pages 395-421, September.
  16. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  17. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  18. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, vol. 107(444), pages 1431-44, September.
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