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The Economies of Scale of Living Together and How They Are Shared: Estimates Based on a Collective Household Model

  • Bütikofer, Aline

    ()

    (Norwegian School of Economics)

  • Gerfin, Michael

    ()

    (University of Bern)

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives' contribution to household income and the duration of the relationship.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4327.

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Length: 27 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4327
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