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.

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hdl.handle.net/1765/105632
KU Leuven, Department of Economics, Discussion Paper Series
Katholieke Universiteit Leuven

Cherchye, L, Cosaert, S, de Rock, B, Kerstens, P.J, & Vermeulen, F. (2017). Individual Welfare Analysis for Collective Households (No. DPS17.16). KU Leuven, Department of Economics, Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/105632