Frederic Vermeulen

Collective Household Models: Principles and Main Results

In the traditional approach to consumer behaviour it is assumed that households behave as if they were single decision making units. This approach has methodological, empirical and welfare economic deficiencies. A valuable alternative to the traditional model is the collective approach to household behaviour. The collective approach explicitly takes account of the fact that many person households consist of several members which may have different preferences. Among these household members, an intrahousehold bargaining process is assumed to take place. Next to providing an introduction to the collective approach, this survey intends to show how different collective household models, each with their own aims and assumptions, are connected.

Married With Children: A Collective Labor Supply Model with Detailed Time Use and Intrahousehold Expenditure Information

We propose a collective labor supply model with household production that generalizes an original model of Blundell, Chiappori and Meghir (2005). In our model, adults’ individual preferences do not only depend on own leisure and individual private consumption of market goods. They also depend on the consumption of domestic goods, which are produced by combining goods bought at the market with individuals’ time. We apply our model to new and unique data on Dutch couples with children. The data contains detailed information about the spouses’ time use and the intrahousehold allocation of all expenditures. Our application uses a novel estimation strategy that builds upon the familiar two-stage allocation representation of the collective model. We obtain interesting (and plausible) empirical results. Spouses’ preferences depend on the consumption of domestically produced goods (including children’s welfare). Next, Pareto weights depend on variables like the individual wages and the share in the household’s nonlabor income. Finally, and perhaps surprisingly, we do not find evidence that mothers care more for their children than fathers.

Opening the Black Box of Intra-Household Decision-Making: Theory and Non-Parametric Empirical Tests of General Collective Consumption Models

We provide “revealed preference” tests of general collective consumption models that account for public consumption and externalities within the household. We further propose a novel approach to model special cases of this model, which imply alternative assumptions regarding the sharing rule. Our application uses the panel data from the Russia Longitudinal Monitoring Survey. We find that the general model, together with a large class of special cases, cannot be rejected. By contrast, we do reject the standard unitary model. Since our tests are entirely nonparametric, this provides strong evidence in favor of models focusing on intrahousehold decision making.

Nonparametric Analysis of Household Labor Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model

We compare the empirical performance of unitary and collective labor supply models, using representative data from the Dutch DNB Household Survey. We conduct a nonparametric analysis that avoids the distortive impact of an erroneously specified functional form for the preferences and/or the intrahousehold bargaining process. Our analysis focuses on the goodness-of-fit of the two behavioral models. To guarantee a fair comparison, we complement this goodness-of-fit analysis with a power analysis. Our results strongly favor the collective approach to modeling the behavior of multi-person households.

Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology

In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost-efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in economics and business management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost-efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.

Robust Rankings of Multidimensional Performances: An Application to Tour de France Racing Cyclists

There is a general interest in ranking performances (e.g., in sports or policy) that essentially implies aggregating several performance dimensions. The usual approach considers a “cardinal” linear weighting of the different single-dimensional performance indicators. The authors present an alternative approach, which merely requires “ordinal” information regarding the importance of the different performance dimensions. It is argued that this approach is robust with respect to alternative specifications of the (possibly nonlinear) underlying performance aggregation function. An application to Tour de France racing cyclists (in the period 1953-2004) illustrates the approach. The authors find that Eddy Merckx, Bernard Hinault, and Lance Armstrong (robustly) dominate almost all other racing cyclists in the sample, although they do not dominate each other. A net-dominance metric ranks Bernard Hinault on the first place in the sample; Eddy Merckx and Lance Armstrong follow very closely ex-aequo on the second place.

Economic Well-Being and Poverty among the Elderly: An Analysis Based on a Collective Consumption Model

An improvement in a contact printer which comprises means for supporting a film and an original in superposed relationship on a vacuum table, means for providing a source of light for exposing the film through the original, and means for moving the light over the surface of the superposed film and original. A substantially impervious, flexible and transparent cover sheet carried by the light moving means is arranged to cover the superposed film and original as the exposing light is scanned across the film and original whereby the vacuum is applied to the film and the original to remove air from therebetween as the film is exposed by the light through the cover sheet and the original. The improvement comprises means for contacting the surface of the cover sheet during use and removing dust and dirt thereon to assure that the optical path for the exposing light remains clear and unobstructed.

A note on Heckman-type corrections in models for zero expenditures

In Heien and Wessells (1990), a two-step estimation procedure, that makes use of Heckman-type corrections, is proposed to estimate consumption on household budget surveys. It is shown that this approach, which draws from switching regressions models, leads to inconsistent estimates.

Foundations of Revealed Preference: Introduction

On 19 April 2011, the Royal Economic Society (RES) and the Centre for Microdata Methods and Practice (CeMMAP) held a special session on the Foundations of Revealed Preference at the RES Annual Conference. This session was in honour of Sydney Afriat (University of Siena), Erwin Diewert (University of British Columbia) and Hal Varian (Berkeley), who are three key contributors to the theory of revealed preference. In this article, I briefly discuss some of the contributions to revealed preference theory by these eminent economists and provide a short introduction to the following three articles by their hand in this Conference Volume.

Acknowledgement of Priority

Robust Rankings of Multidimensional Performances: An Application to Tour de France Racing Cyclists Dr. Knut M. Wittkowski (The Rockefeller University) pointed out that his u-score given in Equation 3 of Wittkowski (2003) and Equation 3 in Wittkowski, Lee, Nussbaum, Chamian, and Krueger (2004) is the same as our net-dominance-metric that aggregates the information provided by our dominance-metric in Equation 2 of Cherchye and Vermeulen (2006). This note is to acknowledge the priority of the work by Wittkowski and his coauthors of which the present authors had unfortunately not been aware.