Confronting the Robinson Crusoe Paradigm with Household-Size Heterogeneity

Posted: 25 Sep 2008

See all articles by Christos Koulovatianos

Christos Koulovatianos

Department of Finance, University of Luxembourg

Carsten Schröder

Free University of Berlin (FUB) - Department of Business and Economics

Ulrich Schmidt

University of Kiel - Institute of Economics

Date Written: August 7, 2008

Abstract

Modern macroeconomics empirically addresses economy-wide incentives behind economic actions by using insights from the way a single representative household would behave. This analytical approach requires that incentives of the poor and the rich are strictly aligned. In empirical analysis a challenging complication is that consumer and income data are typically available at the household level, and individuals living in multimember households have the potential to share goods within the household. The analytical approach of modern macroeconomics would require that intra-household sharing is also strictly aligned across the rich and the poor. Here we have designed a survey method that allows the testing of this stringent property of intra-household sharing and find that it holds: once expenditures for basic needs are subtracted from disposable household income, household-size economies implied by the remainder household incomes are the same for the rich and the poor.

Keywords: Linear Aggregation, Representative Consumer, Equivalence Scales, Survey Method, Household-Size Economies

JEL Classification: C42, E21, D12, E01, D11, D91, D31, I32

Suggested Citation

Koulovatianos, Christos and Schröder, Carsten and Schmidt, Ulrich, Confronting the Robinson Crusoe Paradigm with Household-Size Heterogeneity (August 7, 2008). CFS Working Paper No. 2008/24 . Available at SSRN: https://ssrn.com/abstract=1273557

Christos Koulovatianos (Contact Author)

Department of Finance, University of Luxembourg ( email )

4 Rue Albert Borschette
Luxembourg, L-1246
Luxembourg

Carsten Schröder

Free University of Berlin (FUB) - Department of Business and Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany
+49 030 838-52259 (Phone)
+49 030 838-52560 (Fax)

Ulrich Schmidt

University of Kiel - Institute of Economics ( email )

Olshausenstrasse 40
24098 Kiel, 24098
Germany

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