Estimation of strongCollectivestrong Household Models With Engel Curves.pdfVIP

Estimation of Collective Household Models With Engel Curves Arthur Lewbel and Krishna Pendakur Boston College and Simon Fraser University May 2008 Abstract The structural consumer demand methods used to estimate the parameters of collective household models are typically either very restrictive and easy to implement or very general and difcult to esti- mate. In this paper, we provide a middle ground. We adapt the very general framework of Browning, Chiappori and Lewbel (2007) by adding a simple restriction that recasts the empirical model from a highly nonlinear demand system with price variation to a slightly nonlinear Engel curve system. Our restriction has an interpretation in terms of the behaviour of household scale economies and is testable. Our method identies the levels of (not just changes in) household resource shares, and a variant of equivalence scales called indifference scales. We apply our methodology to Canadian expenditure data. JEL codes: D12, D11, C30, I31, J12. Keywords: Consumer Demand, Collective Model, Sharing rule, Household Bargaining, Bargaining Power, Indifference Scales, Adult Equivalence Scales, Demand Systems, Barten Scales, Nonparametric Identication. Corresponding Author: Arthur Lewbel, Department of Economics, Boston College, 140 Commonwealth Ave., Chestnut Hill, MA, 02467, USA. (617)-552-3678, lewbel@, /~lewbel/ 1 Introduction Dating back at least to Becker (1965, 1981), `collective household models are those in which the house- hold is characterised as a collection of individuals, each of whom has a well dened objective function, and who interact to generate household level decisions. Here we