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Individual welfare analysis for collective households

Laurens Cherchye (), Sam Cosaert, Bram De Rock, Pieter Jan Kerstens and Frederic Vermeulen

Journal of Public Economics, 2018, vol. 166, issue C, 98-114

Abstract: We propose novel tools for the analysis of individual welfare on the basis of aggregate household demand behavior. The method assumes a collective model of household consumption with the public and private nature of goods specified by the empirical analyst. A main distinguishing feature of our approach is that it builds on a revealed preference characterization of the collective model that is intrinsically nonparametric. We show how to identify individual money metric welfare indices from observed household demand, along with the intrahousehold sharing rule and the individuals' willingness-to-pay for public consumption (i.e. Lindahl prices). The method is easy to use in practice and yields informative empirical results, which we demonstrate through both a simulation exercise and an empirical application to labor supply data drawn from the Panel Study of Income Dynamics.

Keywords: Individual welfare; Collective model; Revealed preferences; Sharing rule; Money metric welfare index; Identification; Labor supply (search for similar items in EconPapers)
JEL-codes: D11 D12 D13 C14 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Individual Welfare Analysis for Collective Households (2017) Downloads
Working Paper: Individual welfare analysis for collective households (2017) Downloads
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