Individual Decisions and Household Demand for Consumption and Leisure

Abstract

The standard microeconomic assumption of a household utility function raises two theoretical problems: it contradicts methodological individualism and it ignores economic phenomena such as income and consumption sharing, division of labor, externalities and altruism within a household. This paper reviews two approaches, aggregation theory and the more recent non-unitary models, to compare the different properties that household consumption and leisure demands have to satisfy in the two contexts. The paper also discusses some recent empirical evidence that seems to encourage further investigation in the non-unitary framework.

JEL Classification: D1, D7