Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure

CentER Discussion Paper No. 2008-02

31 Pages Posted: 17 Jan 2008

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Jeroen Sabbe

K.U. Leuven Campus Kortrijk - Subfaculty of Business and Economics; K.U. Leuven - Faculty of Business and Economics

Frederic Vermeulen

Tilburg University - CentER; IZA Institute of Labor Economics

Date Written: January 2008

Abstract

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

Cherchye, Laurens and De Rock, Bram and Sabbe, Jeroen and Vermeulen, Frederic, Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure (January 2008). CentER Discussion Paper No. 2008-02 , Available at SSRN: https://ssrn.com/abstract=1084818 or http://dx.doi.org/10.2139/ssrn.1084818

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Av. F. D. Roosevelt, 50
CP 114
Brussels, B-1050
Belgium

Jeroen Sabbe

K.U. Leuven Campus Kortrijk - Subfaculty of Business and Economics ( email )

Etienne Sabbelaan 53
Kortrijk, West-Vlaanderen 8500
Belgium

HOME PAGE: http://www.econ.kuleuven.be/jeroen.sabbe

K.U. Leuven - Faculty of Business and Economics

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://www.econ.kuleuven.be/jeroen.sabbe

Frederic Vermeulen

Tilburg University - CentER ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 3196 (Phone)

HOME PAGE: http://center.uvt.nl/staff/vermeulen/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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