Marital Matching, Economies of Scale and Intrahousehold Allocations

Abstract

We propose a novel structural method to empirically identify economies of scale in household consumption. We assume collective households with consumption technologies that de…ne 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 di¤erent 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 de…ne individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.

Stable marriage, household consumption and unobserved match quality

“…For example, we can explicitly include a model of household production as in Cherchye, De Rock, Walther, and Vermeulen (2021). Next, we can empirically identify the degree of publicness of household consumption (defining the intrahousehold scale economies) by using the toolkit of Cherchye, De Rock, Surana, and Vermeulen (2020). Finally, as our method allows us to identify the individual (Lindahl) prices for public consumption, we can integrate the methodology of Cherchye, Cosaert, De Rock, Kerstens, and Vermeulen (2018) to evaluate individual welfare in money metric terms for households that consume public goods, along the lines of Chiappori and Meghir (2014) and Chiappori (2016).…”

“…Although the two strands often intersect in the theoretical literature, there is a paucity of empirical analyses that take into account the interactions between matching patterns and intrahousehold allocations. There has always been a perception that it would be desirable to develop such an overarching framework for empirical work but it is only very recently that progress has been made (see, for example, Cherchye, De Rock, Surana, and Vermeulen, 2020;Cherchye, Demuynck, De Rock, and Vermeulen, 2017;Goussé, Jacquemet, and Robin, 2017;Weber, 2018). In this paper we present a novel approach to this issue.…”

Revealed preference characterization of marital stability under mutual consent divorce

“…Next, we assumed that the nature of consumption (public or private) is known. To additionally identify the degree of publicness of household consumption, we can adapt the method of Cherchye et al (2020a). Finally, we assumed that the researcher knows individuals' marriage markets.…”

The more the poorer? Resource sharing and scale economies in large families

“…2 Parallel to our work, Lewbel and Lin (2020) and Donni and El Badaoui (2020) provide identification results that, at least partly, rely on preference stability between singles and individuals in couples or price variation. Alternative methods achieve set-identification of resource shares using axiomatic revealed preference methods (Cherchye et al, 2011(Cherchye et al, , 2015(Cherchye et al, , 2016(Cherchye et al, , 2017. 2013), it cannot be applied to study children's well-being, as they do not live alone.…”