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Nonparametric tests of collectively rational consumption behavior: an integer programming procedure

  • Laurens Cherchye
  • Bram De Rock
  • Jeroen Sabbe
  • Frederic Vermeulen

We present an IP-based nonparametric (revealed preference) testing procedure for rational consumption behavior in terms of general collective models, which include consumption externalities and public consumption. An empirical application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the practical usefulness of the procedure. Finally, we present extensions of the testing procedure to evaluate the goodness-of-fit of the collective model subject to testing, and to quantify and improve the power of the corresponding collective rationality tests.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/131712.

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Date of creation: 2008
Date of revision:
Publication status: Published in: Journal of econometrics (2008) v.147 n° 2,p.258–265
Handle: RePEc:ulb:ulbeco:2013/131712
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
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  1. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2009. "Opening the black box of intra-household decision-making : Theory and non-parametric empirical tests of general collective consumption models," Other publications TiSEM bc6d0cf7-c686-40a4-84f4-9, Tilburg University, School of Economics and Management.
  2. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption : A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
  3. James Andreoni & William Harbaugh, 2005. "Power Indicies for Revealed Preference Tests," Levine's Bibliography 784828000000000181, UCLA Department of Economics.
  4. Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
  5. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
  6. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best nonparametric bounds on demand responses," IFS Working Papers W05/20, Institute for Fiscal Studies.
  7. 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.
  8. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
  9. repec:oup:restud:v:75:y:2008:i:2:p:371-389 is not listed on IDEAS
  10. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2007. "The Revealed Preference Approach to Collective Consumption Behavior: Testing, Recovery and Welfare Analysis," IZA Discussion Papers 3062, Institute for the Study of Labor (IZA).
  11. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  12. 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.
  13. Richard Blundell & Robin, J M, 1995. "Latent separability: grouping goods without weak separability," IFS Working Papers W95/09, Institute for Fiscal Studies.
  14. Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-72, June.
  15. Richard Blundell & Martin Browning & Ian Crawford, 1998. "Nonparametric Engel Curves and Revealed Preference," Discussion Papers 99-07, University of Copenhagen. Department of Economics.
  16. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
  17. Martin Browning & Laura Blow, 2006. "Revealed Preference Analysis of Characteristics Models," Economics Series Working Papers 282, University of Oxford, Department of Economics.
  18. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  19. Mette Christensen, 2007. "Integrability of demand accounting for unobservable heterogeneity: a test on panel data," IFS Working Papers W07/14, Institute for Fiscal Studies.
  20. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  21. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
  22. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
  23. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
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