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Economic well-being and poverty among the elderly: an analysis based on a collective consumption model

  • Laurens Cherchye
  • Bram De Rock
  • Frederic Vermeulen

We apply the collective consumption model of Browning et al. (2010) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife's share that is increasing in total expenditures. We further calculated two sets of poverty rates: one based on the collective consumption model and one based on the traditional approach with a standard equivalence scale. Poverty among widowers is underestimated by the traditional approach. The same is true for women (men) in elderly couples for the first (later) time periods in our analysis. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop in material well-being following the husband's death is rather substantial for women. For men, the picture is reversed. © 2012 Elsevier B.V..

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/131702.

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Date of creation: 2012
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Publication status: Published in: European economic review (2012) v.56 n° 6,p.985–1000
Handle: RePEc:ulb:ulbeco:2013/131702
Note: SCOPUS: ar.j
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  1. Vermeulen, Frederic, 2002. " Collective Household Models: Principles and Main Results," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 533-64, September.
  2. Jeremy Lise & Shannon Seitz, 2007. "Consumption inequality and intra-household allocations," IFS Working Papers W07/09, Institute for Fiscal Studies.
  3. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2005. "Opening the Black Box of Intra-Household Decision-Making : Theory and Non-Parametric Empirical Tests of General Collective Consumption Models," Discussion Paper 2005-51, Tilburg University, Center for Economic Research.
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