Nonparametric Identification and Estimation of Transformation Models

This paper derives sufficient conditions for nonparametric transformation models to be identified and develops estimators of the identified components. Our nonparametric identification result is global, and is derived under conditions that are substantially weaker than full independence. In particular, we show that a completeness assumption combined with conditional independence with respect to one of the regressors suffices for the model to be identified. The identification result is also constructive in the sense that it yields explicit expressions of the functions of interest. We show how natural estimators can be developed from these expressions, and analyze their theoretical properties. Importantly, it is demonstrated that the proposed estimator of the unknown transformation function converges at the parametric rate.nonparametric identification; transformation models; kernel estimation

Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness

Hedonic pricing with quasilinear preferences is shown to be equivalent to stable matching with transferable utilities and a participation constraint, and to an optimal transportation (Monge-Kantorovich) linear programming problem. Optimal assignments in the latter correspond to stable matchings, and to hedonic equilibria. These assignments are shown to exist in great generality; their marginal indirect payoffs with respect to agent type are shown to be unique whenever direct payoffs vary smoothly with type. Under a generalized Spence-Mirrlees condition the assignments are shown to be unique and to be pure, meaning the matching is one-to-one outside a negligible set. For smooth problems set on compact, connected type spaces such as the circle, there is a topological obstruction to purity, but we give a weaker condition still guaranteeing uniqueness of the stable match. An appendix resolves an old problem (# 111) of Birkhoff in probability and statistics [5], by giving a necessary and sufficient condition on the support of a joint probability to guarantee extremality among all joint measures with the same marginals.

Investment in Schooling and the Marriage Market

We produce a model with pre-marital schooling investment, endogenuos marital matching and spousal specialization in homework and market production Pre-marital investments generate two kinds of returns: a labor-market return due to the education premium and a marriage-market return because education can improve the intra-marital share of the surplus one can extract from marriage. When the returns to education are gender neutral, men and women educate in equal proportions and there is pure positive assortative matching in the marriage markets. But if the returns are not gender neutral, then there is mixing in equilibrium where some educated individuals marry uneducated spouses and those who educate less because their labor-market return is lower extract a relatively larger share of the marital surplus. Conditional on the choice of schooling, couples’ career decisions affect the size of their marital surplus, but the existence of large and frictionless marriage markets can still produce efficient household specialization where the higher-wage spouse specializes in market production and the lower-wage spouse engages in homework. Even when cultural and social norms or the time requirements of homework dictate that wives devote relatively more time to homework, women can acquire more schooling than men if a gender wage gap exists but narrows with the level of education.

Heterogeneity and risk sharing in village economies

We measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model and complement the results with a measure based on optimal portfolio choice. Among households with relatives living in the same village, full insurance cannot be rejected, suggesting that relatives provide something close to a complete-markets consumption allocation. There is substantial heterogeneity in risk preferences estimated from the full-insurance model, positively correlated in most villages with portfolio-choice estimates. The heterogeneity matters for policy: Although the average household would benefit from eliminating village-level risk, less-risk-averse households who are paid to absorb that risk would be worse off.

Unitary versus collective models of the household : time to shift theburden of proof?

Until recently, most economists viewed the household as a collection of individuals who behave as if in agreement on how best to combine time and goods (purchased or produced at home) to produce commodities that maximize some common welfare index. This model has been extended far beyond standard demand analysis to include the determinants of health, fertility, education, child fostering, migration, labor supply, home production, land tenure, and crop adoption. The appeal of the unitary model is the simplicity of comparative statics generated and the diversity of issues it can address. But, argue the authors, its theoretical foundations are weak and restrictive; its underlying assumptions are of questionable validity; it has not stood up well to empirical testing; and it ignores or obscures important policy issues. They argue that economists should regard households as collective rather than unitary entities. They make a case for accepting the collective model (with cooperative and noncooperative versions) as the industry standard - with caveats. The unitary model should be regarded as a special subset of the collective approach, suitable under certain conditions. The burden of proof should shift to those who claim the unitary model as the rule and collective models as the exception. Implicit in the authors'argument is the view that household economics has not taken Becker seriously enough."A household is truly a'small factory,'"wrote Becker (1965)."It combines capital goods, raw materials, and labor to clean, feed, procreate, and otherwise produce useful commodities."The authors, too, perceive the household as a factory, which, like all factories, contains individuals who - motivated at times by altruism, at times by self-interest, and often by both - cajole, cooperate, threaten, help, argue, support, and, indeed, occasionally walk out on each other. Labor economists and industrial organization theorists have long exploited the value of going inside the black box of the factory. It is time to do the same for household economics, say the authors.Health Economics&Finance,Environmental Economics&Policies,Poverty Lines,Housing&Human Habitats,Educational Technology and Distance Education

Efficient Intra-Household Allocations: a General Characterization and Empirical Tests

The neo-classical theory of demand applies to individuals yet in empirical work it is usually taken as valid for households with many members (or even for whole economies!). This paper explores what the theory of individual members of the household resolve conflicts. All we assume is that however decisions are made, outcomes are efficient. We refer to this as the collective setting. The main result we derive shows that in the collective setting household demands must satisfy a symmetry and rank condition on the slutsky matrix. This condition includes the usualsymmetry condition as a special case. We also present some further results on the effects on demands of variables that do not modify oreferences but that do affect how decisions are made. The prime candidates for such variables are the incomes of the individual in the household. We apply our theory to a series of surveys of household expenditures from Canada. We use a flexible quadratic log demand system as out maintained model. The tests of the usual symmetry conditions are rejected for two person households but not for one person households. Moreover we show that the estimates for the two person housholds, assmuing a single utility function for the household, display problems that are absent for single person households. We then test for our collective setting conditions on the couples data. None of the collective setting restrictions are rejected. We conclude that the collective setting is a plausible and tractable next step to take in the analysis of household demand and labour supply behaviour.

Heterogeneity and risk sharing in village economies

We show how to use panel data on household consumption to directly estimate households' risk preferences. Specifically, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we then test allowing for this heterogeneity. There is substantial, statistically significant heterogeneity in estimated risk preferences. Full insurance cannot be rejected. As the risk-sharing as-if-complete-markets theory might predict, estimated risk preferences are unrelated to wealth or other characteristics. The heterogeneity matters for policy: Although the average household would benefit from eliminating village-level risk, less-risk-averse households that are paid to absorb that risk would be worse off by several percent of household consumption