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Individual Welfare Analysis for Collective Households

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

No ECARES 2017-44, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

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 method 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 a simulation analysis and an empirical application to labor supply data.

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)
New Economics Papers: this item is included in nep-dem and nep-upt
Date: 2017-11
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Journal Article: Individual welfare analysis for collective households (2018) Downloads
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