Sharing Rule Identification for General Collective Consumption Models

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We propose a method to identify bounds (i.e. set identification) on the sharing rule for a general collective household consumption model. Unlike the effects of distribution factors, it is well known that the level of the sharing rule cannot be uniquely identified without strong assumptions on preferences across households of different compositions. Our new results show that, though not point identified without these assumptions, bounds on the sharing rule can still be obtained. We get these bounds by applying revealed preference restrictions implied by the collective model to the household's continuous aggregate demand functions. We obtain informative bounds even if nothing is known about whether each good is public, private, or assignable within the household, though having such information tightens the bounds. An empirical application demonstrates the practical usefulness of our method. JEL Classification:D11, D12, D13, C14, C30

Individual Welfare Analysis for Collective Households

“…However, applying these techniques to our setting is quite a bit more complicated than existing applications to which such asymptotic theory has been successfully applied. Similar issues arise in other applications that combine demand estimation with revealed preference restrictions, such as Blundell, Browning, and Crawford (2008), Blundell, Kristensen, and Matzkin (2014) and Cherchye, De Rock, Lewbel, and Vermeulen (2015).…”

“…8 Our focus on WARP instead of SARP follows Cherchye, De Rock, Lewbel, and Vermeulen (2015). As argued by these authors, when exploiting SARP, it would be much more difficult, if not completely intractable, to fully operationalize transitivity in an empirical application.…”

“…In addition, it will demonstrate that our method has substantial empirical bite, despite its nonparametric orientation. At the methodological level, this paper complements recent work of Cherchye, De Rock, Lewbel, and Vermeulen (2015). Two main differences are that (1) this earlier paper focused on a general collective consumption model in which the (public or private) nature of the goods is left unspecified, and (2) the proposed method allows for sharing rule recovery but not for identification of money metric welfare indices.…”

“…In particular, we consider the sample of 865 two-person households without children that was also studied by Cherchye, De Rock, Lewbel, and Vermeulen (2015). In their original set-up, these authors distinguished between food, housing and other non-leisure expenditures.…”

Bounding Counterfactual Demand with Unobserved Heterogeneity and Endogenous Expenditures

“…By conditioning on housing status and vehicle ownership, we also 9 In principle, we could explicitly account for differences in household size by adopting a so-called collective model of household consumption (after Chiappori (1988)). See Cherchye, De Rock, and Vermeulen (2007) and Cherchye, De Rock, Lewbel, and Vermeulen (2015) for associated axioms of revealed preference. We see the extension of our method towards collective consumption models as an interesting avenue for follow-up research.…”