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.

Individual welfare, collective model, revealed preferences, sharing rule, money metric welfare index, identification, labor supply
Consumer Economics: Theory (jel D11), Consumer Economics: Empirical Analysis (jel D12), Household Production and Intrahousehold Allocation (jel D13), Semiparametric and Nonparametric Methods (jel C14)
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