The Economies of Scale of Living Together and How They are Shared: Estimates Based on a Collective Household Model
University of Bern
University of Bern; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 4327
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.
Number of Pages in PDF File: 27
Keywords: collective household models, sharing rule, equivalence scale, subjective data
JEL Classification: D12, C21, D19working papers series
Date posted: August 4, 2009
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