Income Pooling between Australian Young Adults and Their Parents: An Improved Parametric Model and Informal Semi-Parametric Tests

38 Pages Posted: 5 Nov 2009  

Robert V. Breunig

Crawford School of Public Policy

Rebecca J. McKibbin

Australian National University (ANU) - Research School of Social Sciences (RSSS)

Date Written: July 6, 2009

Abstract

We test whether young adults who co-reside with their parents derive influence over household-level expenditure by earning income. We propose a new variant of the Engel curve consistent with the Quadratic Almost Ideal Demand System but which allows a simpler test of income pooling. Using semi-parametric techniques, we show that our functional form appears to fit the data better than the one that has usually been used in the literature. We reject income pooling between young adults and parents for four expenditure categories. We also apply our tests to income pooling between spouses and provide evidence that rejection of income pooling may be related to functional form mis-specification.

Keywords: intra-household allocation, co-resident young adults, income pooling

JEL Classification: C14, D13, J12

Suggested Citation

Breunig, Robert V. and McKibbin, Rebecca J., Income Pooling between Australian Young Adults and Their Parents: An Improved Parametric Model and Informal Semi-Parametric Tests (July 6, 2009). Available at SSRN: https://ssrn.com/abstract=1500453 or http://dx.doi.org/10.2139/ssrn.1500453

Robert V. Breunig (Contact Author)

Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia
61261252148 (Phone)

HOME PAGE: http://https://crawford.anu.edu.au/crawford_people/content/staff/rbreunig.php

Rebecca J. McKibbin

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia

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