Individual welfare analysis for collective households

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

No 599737, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

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.

Date: 2017-11
New Economics Papers: this item is included in nep-dcm
Note: paper number DPS 17.16
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Published in Department of Economics. Discussion paper series,, pages 1-39

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Related works:
Journal Article: Individual welfare analysis for collective households (2018)
Working Paper: Individual Welfare Analysis for Collective Households (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:599737

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