Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure
CentER Discussion Paper No. 2008-02
31 Pages Posted: 17 Jan 2008
Date Written: January 2008
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.
Keywords: collective consumption model, revealed preferences, nonparametric rationality tests, integer programming (IP)
JEL Classification: D11, D12, C14
Suggested Citation: Suggested Citation