Individual welfare analysis for collective households.Authors: CHERCHYE Laurens, COSAERT Sam, DE ROCK Bram, KERSTENS Pieter Jan, VERMEULEN Frederic.
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 non-parametric. We show how to identify individual money metric welfare indices from observed household demand, along with the intra-household 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.
Reference: CHERCHYE Laurens, COSAERT Sam, DE ROCK Bram, KERSTENS Pieter Jan, VERMEULEN Frederic. Individual welfare analysis for collective households. Journal of Public Economics, 2018, vol. 166, pp. 98-114.Keywords: