Opening the Black Box of Intra-Household Decision-Making: Theory and Non-Parametric Empirical Tests of General Collective Consumption Models

27 Pages Posted: 16 May 2005

See all articles by Frederic Vermeulen

Frederic Vermeulen

Tilburg University - CentER; IZA Institute of Labor Economics

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Bram de Rock

Katholieke Universiteit Leuven - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics

Date Written: March 2005

Abstract

We non-parametrically test a general collective consumption model with public consumption and externalities inside the household. We further propose a novel approach to model special cases of the general collective model. These special cases include alternative restrictions on the 'sharing rule' that applies to each household, and which defines the distribution of the household budget over the household members. A limiting case is the unitary model. Our application uses data from the Russia Longitudinal Monitoring Survey (RLMS); the panel structure of this data set allows non-parametric testing of the behavioral models without relying on preference homogeneity assumptions across similar individuals. This application includes test results but also a power analysis for different specifications of the collective consumption model. Our main findings are that the most general collective model, together with a large class of special but still fairly general cases, cannot be rejected by the data, while other, restricted, versions of the general model, including the unitary alternative, are rejected.

Since these tests are entirely non-parametric, this provides strong evidence in favor of models focusing on intra-household decision-making.

Keywords: Collective Household Models, Intra-Household Allocation, Revealed Preferences, Non-Parametric Analysis

JEL Classification: D11, D12, C14

Suggested Citation

Vermeulen, Frederic and Cherchye, Laurens and de Rock, Bram, Opening the Black Box of Intra-Household Decision-Making: Theory and Non-Parametric Empirical Tests of General Collective Consumption Models (March 2005). Available at SSRN: https://ssrn.com/abstract=721381

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

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) - Subfaculty of Economics and Applied Economics ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

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