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Marital Matching, Economies of Scale and Intrahousehold Allocations

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  • Cherchye, Laurens

    (KU Leuven)

  • De Rock, Bram

    (ECARES, Free University of Brussels)

  • Surana, Khushboo

    (KU Leuven)

  • Vermeulen, Frederic

    (KU Leuven)

Abstract

We propose a novel structural method to empirically identify economies of scale in household consumption. We assume collective households with consumption technologies that define the public and private nature of expenditures through Barten scales. Our method recovers the technology by solely exploiting preference information revealed by households' consumption behavior. The method imposes no parametric structure on household decision processes, accounts for unobserved preference heterogeneity across individuals in different households, and requires only a single consumption observation per household. Our main identifying assumption is that the observed marital matchings are stable. We apply our method to data drawn from the US Panel Study of Income Dynamics (PSID), for which we assume that similar households (in terms of observed characteristics like age or region of residence) operate on the same marriage market and are characterized by a homogeneous consumption technology. This application shows that our method yields informative results on the nature of scale economies and intrahousehold allocation patterns. In addition, it allows us to define individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.

Suggested Citation

  • Cherchye, Laurens & De Rock, Bram & Surana, Khushboo & Vermeulen, Frederic, 2016. "Marital Matching, Economies of Scale and Intrahousehold Allocations," IZA Discussion Papers 10242, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp10242
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    Cited by:

    1. Martin Browning & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2021. "Stable marriage, household consumption and unobserved match quality," CEBI working paper series 21-13, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    2. Pawel Dziewulski, 2021. "A comprehensive revealed preference approach to approximate utility maximisation," Working Paper Series 0621, Department of Economics, University of Sussex Business School.

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    More about this item

    Keywords

    marriage market; intrahousehold allocation; economies of scale; revealed preference; PSID;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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