Nonparametric Analysis of Household Labor Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model

We compare the empirical performance of unitary and collective labor supply models, using representative data from the Dutch DNB Household Survey.We conduct a nonparametric analysis that avoids the distortive impact of an erroneously speci.ed functional form for the prefer-ences and/or the intrahousehold bargaining process.Our analysis focuses on the goodness-of-.t of the two behavioral models.To guarantee a fair comparison, we complement this goodness-of-.t analysis with a power analysis.Our results strongly favor the collective approach to modeling the behavior of multi-person householdslabor supply;collective model;unitary model;nonparametric analysis;revealed preferences

Economic Well-Being and Poverty Among the Elderly: An Analysis Based on a Collective Consumption Model

We apply the collective consumption model of Browning, Chiappori and Lew- bel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substan- tial economies of scale and a wife's share that is increasing in total expenditures. We further calculated poverty rates by means of the collective consumption model. Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overesti- mated) by the traditional approach. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband's death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.collective model;intra-household allocation;indifference scales;economies of scale;poverty

Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology

In designing a production model for firms that generate multiple outputs, we take as a starting point that such multi-output production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data.We illustrate our methodology by examining the cost efficiency of research programs in Economics and Business Management faculties of Dutch universities.This application shows that the proposed methodology may entail robust conclusions regarding cost efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.production behavior;multi-product firms;input externalities;joint input use;economies of scope;nonparametric tests

The Revealed Preference Approach to Collective Consumption Behavior: Nonparametric Testing and Sharing Rule Recovery (Revised version of CentER DP 2007-73)

We present a nonparametric 'revealed preference' methodology for empiri- cally analyzing collective consumption behavior. First, we introduce an integer programming (IP) methodology for testing data consistency with collective con- sumption models that account for publicly as well as privately consumed goods. This IP methodology can include information on 'assignable quantities' for pri- vate goods. Next, we show that the IP methodology allows for recovering the personalized (Lindahl) prices for the public goods and the personalized quan- tities for the private goods. In turn, this implies recovery of the sharing rule (i.e. personalized income share levels). Numerical examples and an empirical application demonstrate the practical usefulness of the methodology.collective model;revealed preferences;data consistency tests;re- covery;integer programming;sharing rule

An Afriat Theorem for the Collective Model of Household Consumption

We provide a nonparametric 'revealed preference' characterization of rational household behavior in terms of the collective consumption model, while accounting for general (possibly non-convex) individual preferences. We establish a Collective Axiom of Revealed Preference (CARP), which provides a necessary and su¢ cient condition for data consistency with collective rationality. Our main result takes the form of a 'collective' version of the Afriat Theorem for rational behavior in terms of the unitary model. This theorem has some interesting implications. With only a finite set of observations, the nature of consumption externalities (positive or negative) in the intra-household allocation process is non-testable. The same non-testability conclusion holds for privateness (with or without externalities) or publicness of consumption. By contrast, concavity of individual utility functions (representing convex preferences) turns out to be testable. In addition, monotonicity is testable for the model that assumes all household consumption is public.Collective model;consumption;Pareto efficiency;revealed preferences;Afriat theorem;Collective Axiom of Revealed Preferences

Is Utility Transferable? A Revealed Preference Analysis

We provide a revealed preference analysis of the transferable utility hypothesis, which is widely used in economic models. First, we establish revealed preference conditions that must be satisfied for observed group behavior to be consistent with Pareto efficiency under transferable utility. Next, we show that these conditions are easily testable by means of integer programming methods. The tests are entirely nonparametric, which makes them robust with respect to specification errors. Finally, we demonstrate the practical usefulness of our conditions by means of an application to Spanish consumption data. To the best of our knowledge, this is the first empirical test of the transferable utility hypothesis.transferable utility hypothesis;generalized quasi-linearity;nonparamet- ric tests;revealed preferences

Degrees of Cooperation in Household Consumption Models: A Revealed Preference Analysis

We develop a revealed preference approach to analyze non-unitary con- sumption models with intrahousehold allocations deviating from the cooper- ative (or Pareto e¢ cient) solution. At a theoretical level, we establish re- vealed preference conditions of household consumption models with varying degrees of cooperation. Using these conditions, we show independence (or non-nestedness) of the di¤erent (cooperative-noncooperative) models. At a practical level, we show that our characterization implies testable conditions for a whole spectrum of cooperative-noncooperative models that can be verified by means of mixed integer programming (MIP) methods. This MIP formula- tion is particularly attractive in view of empirical analysis. An application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demon- strates the empirical relevance of consumption models that account for limited intrahousehold cooperation.household consumption;intrahousehold cooperation;revealed preferences;Generalized Axiom of Revealed Preference (GARP);mixed in- teger programming (MIP).

Noncooperative Household Consumption with Caring

We present a household consumption model that accounts for caring house- hold members, while allowing for noncooperative behavior in decisions on pub- lic goods. The intrahousehold consumption outcome critically depends on the degree of caring between the household members. By varying the degree of in- trahousehold caring, the model encompasses a whole continuum of household consumption models that are situated between the fully cooperative model and the noncooperative model without caring. This feature is used to define a measure for the degree of cooperation within the household. We also establish a dual characterization of our noncooperative model with caring preferences: we show that the model is dually equivalent to a noncooperative model with non-caring preferences that is characterized by intrahousehold transfers. Fi- nally, following a revealed preference approach, we derive testable implications of the model for empirical data. We demonstrate the practical usefulness of the model through an illustrative application.household consumption;caring preferences;intrahousehold coop- eration;Nash equilibrium;revealed preferences