Marital Matching, Economies of Scale and Intrahousehold Allocations

KU Leuven Department of Economics, DPS16.23

39 Pages Posted: 23 Nov 2016

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Bram De Rock

Katholieke Universiteit Leuven Campus Kortrijk (KULAK)

Khushboo Surana

KU Leuven

Frederic Vermeulen

KU Leuven

Multiple version iconThere are 2 versions of this paper

Date Written: September 16, 2016

Abstract

We propose a novel structural method to empirically identify economies of scale in household consumption. We assume collective households with consumption technologies that define the public and private nature of expenditures through Barten scales. Our method recovers the technology by solely exploiting preference information revealed by households' consumption behavior. The method imposes no parametric structure on household decision processes, accounts for unobserved preference heterogeneity across individuals in different households, and requires only a single consumption observation per household. Our main identifying assumption is that the observed marital matchings are stable. We apply our method to data drawn from the US Panel Study of Income Dynamics (PSID), for which we assume that similar households (in terms of observed characteristics like age or region of residence) operate on the same marriage market and are characterized by a homogeneous consumption technology. This application shows that our method yields informative results on the nature of scale economies and intrahousehold allocation patterns. In addition, it allows us to define individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.

Keywords: marriage market, intrahousehold allocation, economies of scale, revealed preference, PSID

JEL Classification: D11, D12, D13, J12

Suggested Citation

Cherchye, Laurens and De Rock, Bram and Surana, Khushboo and Vermeulen, Frederic, Marital Matching, Economies of Scale and Intrahousehold Allocations (September 16, 2016). KU Leuven Department of Economics, DPS16.23, Available at SSRN: https://ssrn.com/abstract=2874196 or http://dx.doi.org/10.2139/ssrn.2874196

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

Katholieke Universiteit Leuven Campus Kortrijk (KULAK) ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

Khushboo Surana

KU Leuven ( email )

Oude Markt 13
Leuven, 3000
Belgium

Frederic Vermeulen

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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