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Marital Matching, Economies of Scale and Intrahousehold Allocations

Author

Listed:
  • Cherchye, Laurens

    (KU Leuven)

  • De Rock, Bram

    (ECARES, Free University of Brussels)

  • Surana, Khushboo

    (KU Leuven)

  • Vermeulen, Frederic

    (KU Leuven)

Abstract
We propose a novel structural method to empirically identify economies of scale in household consumption. We assume collective households with consumption technologies that define the public and private nature of expenditures through Barten scales. Our method recovers the technology by solely exploiting preference information revealed by households' consumption behavior. The method imposes no parametric structure on household decision processes, accounts for unobserved preference heterogeneity across individuals in different households, and requires only a single consumption observation per household. Our main identifying assumption is that the observed marital matchings are stable. We apply our method to data drawn from the US Panel Study of Income Dynamics (PSID), for which we assume that similar households (in terms of observed characteristics like age or region of residence) operate on the same marriage market and are characterized by a homogeneous consumption technology. This application shows that our method yields informative results on the nature of scale economies and intrahousehold allocation patterns. In addition, it allows us to define individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.

Suggested Citation

  • Cherchye, Laurens & De Rock, Bram & Surana, Khushboo & Vermeulen, Frederic, 2016. "Marital Matching, Economies of Scale and Intrahousehold Allocations," IZA Discussion Papers 10242, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10242
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Mikhail Freer & Khushboo Surana, 2023. "Stable Marriage, Children, and Intrahousehold Allocations," Papers 2302.08541, arXiv.org.
    2. Cristina Borra & Martin Browning & Almudena Sevilla, 2021. "Marriage and housework," Oxford Economic Papers, Oxford University Press, vol. 73(2), pages 479-508.
    3. Martin Browning & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2024. "Spouses with Benefits: on Match Quality and Consumption inside Households," Working Papers ECARES 2024-11, ULB -- Universite Libre de Bruxelles.
    4. Martin Browning & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2021. "Stable marriage, household consumption and unobserved match quality," Working Papers of Department of Economics, Leuven 679647, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    5. Laurens Cherchye & Bram De Rock & Khushboo Surana, 2024. "Marital Matching, Labor Market Participation and Individual Welfare Analysis," Working Papers ECARES 2024-07, ULB -- Universite Libre de Bruxelles.
    6. Gast'on P. Fern'andez, 2023. "Does personality affect the allocation of resources within households?," Papers 2307.02918, arXiv.org.
    7. Calvi, Rossella & Penglase, Jacob & Tommasi, Denni & Wolf, Alexander, 2023. "The more the poorer? Resource sharing and scale economies in large families," Journal of Development Economics, Elsevier, vol. 160(C).
    8. Pawel Dziewulski, 2021. "A comprehensive revealed preference approach to approximate utility maximisation," Working Paper Series 0621, Department of Economics, University of Sussex Business School.
    9. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    10. Ugo Bolletta & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Luca Paolo Merlino, 2024. "Identifying Marriage Markets," Working Papers ECARES 2024-12, ULB -- Universite Libre de Bruxelles.
    11. Pawe{l} Dziewulski & Joshua Lanier & John K. -H. Quah, 2024. "Revealed preference and revealed preference cycles: a survey," Papers 2405.08459, arXiv.org.
    12. Jesper R.-V. Soerensen, 2020. "Testing a Class of Semi- or Nonparametric Conditional Moment Restriction Models using Series Methods," Discussion Papers 20-04, University of Copenhagen. Department of Economics.
    13. Elin Colmsjoe, 2024. "A Flying Start: The Long-Run Effects of Inter Vivos Transfers," CEBI working paper series 24-02, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    14. Huber, Katrin & Winkler, Erwin, 2019. "All you need is love? Trade shocks, inequality, and risk sharing between partners," European Economic Review, Elsevier, vol. 111(C), pages 305-335.

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    More about this item

    Keywords

    economies of scale; intrahousehold allocation; marriage market; revealed preference; PSID;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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