Individual-Level Inequality

Laurens Cherchye (), Bram De Rock () and Frederic Vermeulen ()
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Laurens Cherchye: University of Leuven
Bram De Rock: ECARES
Frederic Vermeulen: University of Leuven

No 18941, IZA Discussion Papers from IZA Network @ LISER

Abstract: Standard household-level data hide substantial heterogeneity in how consumption, money, and time are allocated within households. This motivates the need for measuring welfare at the individual level and a structural approach on how household data can be used to capture these differences. After documenting what can be learned from direct survey evidence, we present the collective approach as an attractive framework for modeling intra-household decision-making with preference heterogeneity, public consumption, and home production. We then survey three identification strategies that recover individual preferences and resource shares from widely available datasets: differential, revealed preference, and preference-similarity methods. Applying these tools reveals that a sizable share of overall inequality originates within households and that individual poverty rates often diverge sharply from household-level measures. Overall, our review demonstrates that measuring welfare at the individual level fundamentally reshapes our understanding of inequality, and offers practical guidance for incorporating intra-household heterogeneity into empirical welfare evaluations.

Keywords: individual welfare measurement; intra-household inequality; collective household consumption; sharing rule; time use (search for similar items in EconPapers)
JEL-codes: D13 D31 I32 J22 (search for similar items in EconPapers)
Date: 2026-09
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