Economic Well-Being and Poverty Among the Elderly: An Analysis Based on a Collective Consumption Model

31 Pages Posted: 23 May 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)

Frederic Vermeulen

Tilburg University - CentER; IZA Institute of Labor Economics

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Abstract

We apply the collective consumption model of Browning, Chiappori and Lewbel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife's share that is increasing in total expenditures. We further calculated poverty rates by means of the collective consumption model. Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overestimated) by the traditional approach. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband's death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.

Keywords: collective model, intra-household allocation, indifference scales, economies of scale, poverty

JEL Classification: D11, D12, D13, D63, I31

Suggested Citation

Cherchye, Laurens and De Rock, Bram and Vermeulen, Frederic, Economic Well-Being and Poverty Among the Elderly: An Analysis Based on a Collective Consumption Model. IZA Working Paper No. 3349, Available at SSRN: https://ssrn.com/abstract=1135925 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

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

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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