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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 [Netherlands])

  • Bram De Rock

    ()

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

  • Vincenzo Platino

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - 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
Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2010.90 - ISSN : 1955-611X. 2010
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. M.J. Todd & A. Fostel & H.E. Scarf, 2004. "Two New Proofs of Afriat's Theorem," Econometric Society 2004 North American Summer Meetings 632, Econometric Society.
  2. 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.
  3. Timothy Berry & William Harbaugh & Kate Krause, 2001. "Garp for kids: On the development of rational choice behavior," Artefactual Field Experiments 00056, The Field Experiments Website.
  4. 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.
  5. Cherchye, L.J.H. & de Rock, B. & Sabbe, J. & Vermeulen, F.M.P., 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior : An Integer Programming Procedure," Discussion Paper 2008-2, Tilburg University, Center for Economic Research.
  6. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  7. 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.
  8. Browning, M. & Chiappori, P.A., 1994. "Efficient Intra-Household allocations: A General Characterization and Empirical Tests," DELTA Working Papers 94-16, DELTA (Ecole normale supérieure).
  9. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "An Afriat Theorem for the collective model of household consumption," Working Papers Department of Economics ces0825, KU Leuven, Faculty of Economics and Business, Department of Economics.
  10. Gersbach, Hans & Haller, Hans, 2003. "When Inefficiency Begets Efficiency," Economics Series 128, Institute for Advanced Studies.
  11. 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.
  12. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
  13. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  14. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 176-198.
  15. Pollak, R.A., 1990. "Distinguished Floow: Houthakker'S Contributions To Economics," Working Papers 90-06, University of Washington, Department of Economics.
  16. 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.
  17. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  18. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, vol. 77(3), pages 763-799, 05.
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