Individual welfare analysis: a tale of consumption, time use and preference heterogeneity

Tim Obermeier

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: How accurately does household income reflect the well-being of the individuals living within the household? Looking at household income does not take unequal consumption sharing within families, the value of time use (leisure and housework) and preference heterogeneity into account. I build a model of family decision-making and the marriage market which jointly captures these aspects and estimate the model based on British time use data. I use the estimated model to study poverty and inequality based on the individual-level Money-Metric Welfare Index (MMWI). The main result is that only 59% of individuals who are poor in terms of the MMWI ('welfare-poor') are also income-poor, suggesting that the conventional focus on income misses a substantial fraction of the welfare-poor. I find that accounting for unobserved preference heterogeneity is an important factor in assessing individual welfare. From an aggregate perspective, inequality within families accounts for 18% of overall welfare inequality, and heterogeneity in economies of scale across households account for 23% of welfare inequality. Finally, to illustrate the policy relevance of individual welfare measures, I study how minimum wage increases affect welfare-poverty in this framework.

Keywords: individual welfare; preference heterogeneity; inequality; marriage market; intra-household inequality; minimum wage (search for similar items in EconPapers)
JEL-codes: D13 D63 E21 I32 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2023-10-23
New Economics Papers: this item is included in nep-inv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://eprints.lse.ac.uk/121303/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121303

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().