A nested test of the Barten model of equivalence scales

The Barten model, as the principal equivalence scale model, has considerable policy importance. It has, however, never been subjected to a statistically satisfactory test. This note proposes a simple modelling artefact that allows the Barten model to be nested and tested in the conventional way. Illustrative estimation is, then, carried out on U.K. budget data.     

Social security and consumer spending in an international cross section

This paper expands the base of empirical evidence on the social security aggregate private saving issue by examining the behavior of consumer expenditure in 16 industrialized countries over the 1951–60 period. The results are mixed in that time series movements of social security exhibit a positive relation to consumer spending, while the cross-sectional variations reveal a negative association. Our overall conclusion is that the cross-country evidence provides neither empirical support for the hypothesis that social security depresses private saving nor an empirical refutation of that hypothesis. We argue that this indeterminacy of results applies also to previous studies of U.S. time series and to analyses of household cross sections in the U.S.     

Empirical evidence on competitive bidding: Some surprising results

This paper compares the assumptions and predictions of common values auction theory with OCS leasing data. We find that the general assumption of continuous bid density functions is not supported by the empirical evidence. This leads us to suggest several lines for future theoretical, experimental and empirical research.     

Pensions for Singles and Couples

Retirement policies often seek to set pensions at levels that enable single and married pensioners to have the same standard of living. The existing literature on consumer equivalence scales provides little assistance in reaching this policy objective, as the estimated scales are both imprecise and reliant upon strong and opaque assumptions. This paper proposes an alternative modeling strategy which has low data requirements and involves the use of detailed, but transparent, assumptions about the extent of joint consumption of particular commodities. These assumptions are embedded in an economic model of household consumption and combined with household expenditure data to calculate consumer equivalence scales. It is estimated that, in 2003–04, Australian couples of Age Pension age who owned their own home needed expenditures between 1.32 and 1.60 times that of a single person. These scales were lower than those used in the pension system.     

Individual decisions and household demand for consumption and leisure

The standard microeconomic assumption of a household utility function raises two theoretical problems: it contradicts methodological individualism and it ignores economic phenomena such as income and consumption sharing, division of labour, externalities and altruism within a household. This paper reviews two approaches, aggregation theory and the more recent non-unitary models, to compare the different properties that household consumption and leisure demands have to satisfy in the two contexts. The paper also discusses some recent empirical evidence that seems to encourage further investigation in the non-unitary framework.     

The Stolper–Samuelson Theorem Faces Congress

The factor–industry detachment corollary of the Stolper–Samuelson theorem predicts that the economic interests of trade policy are independent of industry and depend only on the type of factor ownership. This paper examines whether congressional voting patterns on trade policy are determined by the factor endowment of the constituency or by its industrial composition. The industry model of trade policy determination is not rejected by the empirical tests while the results for the factor model are ambiguous. This provides evidence that the literature examining congressional voting patterns on broad-based trade policy should re-evaluate the maintained assumption that factors do not matter.     

Income Treatment Effects in Contingent Valuation: The Case of the Swedish Predator Policy

This paper provides case study evidence on two relevant issues in estimating the relationship between WTP and income using contingent valuation: (1) the choice of income measure; and (2) the modelling choice. Addressing these issues, a sensitivity analysis is performed on a dataset concerning implementation of the Swedish predator policy. The results show that the estimated income-elasticity of WTP varies between 0.12 and 0.40 for the models estimated. The main conclusion drawn from the analysis is that controlling for the number of adults in the household is important for finding a significant income effect, when the household income measure is used. Besides this finding the empirical analysis finds little support for the hypothesis that the choice of income measure and modelling assumptions significantly influence the overall model fit.     

Expenditure on children: A Rothbarth-type method consistent with scale economies and parents' bargaining

We suggest a new methodology to estimate the share of household income accruing to children. The household behavior is represented according to the collective approach. That is, each household member is characterized by specific preferences. Following the principle of the Rothbarth approach, the identification of the children's share requires the observation of adult-specific goods. Our method differs from this traditional approach in that it is compatible with economies of scale as well as with parents' bargaining. We illustrate the method with an application to the French Household Budget Survey.     

Aggregation of Utility and Equivalence Scales: A Solution to the Pangloss Critique

Definitions of equivalence scales are usually based on a household utility function. This may be founded on an assumption of the household maximizing a welfare function of individual utilities. Basing inter-household comparisons of welfare on this approach is fallacious because households put different weight on the utility of the various household members, a weighting that does not necessarily correspond to an ethically sound aggregation of utility. This is called the Pangloss critique. To solve the problem, I suggest keeping the model of household behavior, but to introduce a new function to aggregate the household members' utilities. Equivalence scales based on this approach are shown to have desirable properties.     

Collective fineness of stock prices and efficiency of financial markets

Recent literature exploring the efficiency properties of options has examined the conditions under which incomplete financial markets would be equivalent to the Arrow-Debreu model. A usual assumption made in establishing such an equivalence is that some security price is ‘fine’ on the state space. This assumption is relaxed. Under more realistic assumptions it is shown that any portfolio is fine and options written on it can bring about complete markets.     

Household composition,Engel curves and welfare comparisons between households: A duality approach

This paper is about household composition effects in consumer theory. These are important for the specification and estimation of Engel curves and demand functions. The models examined here have important applications in the areas of the measurement of cost of living indices, the study of poverty and inequality and in certain aspects of social policy. The models are based on the approach of Barten (1964). Taste differences between households are parameterized in a way which has been called simple good augmenting or simple repackaging in the literature on quality change. In this theory, changes in household composition play an analogous role to price changes. ‘True household equivalent scales’ are developed which are analogous to true cost of living indices and permit welfare comparisons across households.     

时变贝塔资本资产定价模型实证研究

自从1964年CAPM模型提出以来,学术界对它的研究就一直没有停止过。在理论层面,通过放松和改变假设得到了新的模型;在实证层面,则是应用新的实证方法验证理论模型的正确性。最新提出的多元GARCH模型具有预测多元资产条件协方差矩阵的功能,因此将这一特性应用于CAPM模型的研究中就成为了一个独特的视角。通过实证研究发现,这种时变贝塔能够更精确地刻画单个资产相对于市场组合的风险大小。     

GENDER, POVERTY AND THE INTRA-HOUSEHOLD DISTRIBUTION OF RESOURCES

Most empirical studies of poverty assume an equal sharing of resources between all household members. There is a growing body of research indicating that this assumption is not realistic. This paper explores how the unequal sharing of resources could potentially affect the measurement of poverty. Simulations based on micro-data from two countries (Italy and the U.S.A.) are carried out under the assumption that women "lose" and men and children "gain" because of unequal sharing in the household. Our findings suggest that if there is significant intra-household inequality of this type, as some writers have suggested, then conventional methods of poverty measurement will likely to lead to a serious under-estimate (over-estimate) of the incidence and intensity of female (male) poverty.     

TIME AND THE COST OF CHILDREN

This paper uses the "adult goods" method to estimate the full costs of children. Full costs include both expenditure and time costs. Adult personal time (comprising pure leisure, sleep and other personal care) is used as the adult good. Previous research has shown that the presence of children in the household leads to a reduction in adult personal time. This paper develops a simple economic model of the household to show how this information can be used to develop an equivalence scale for adult consumption that takes account of both the expenditure and time costs of children. Preliminary estimates using Australian data suggest a very large cost—much higher than that typically assumed for expenditure costs. The full cost of children declines with age, despite the expenditure cost rising. The paper discusses the limitations of the adult good method and the assumptions needed to draw welfare conclusions from these and other estimates of child costs.     

Capital income taxation and perfect foresight

This paper develops a perfect foresight model of capital income taxation in a representative household neoclassical one-sector framework. The household sector is based on intertemporal utility maximization. The main result is the equivalence of a perfect foresight solution and an artificial central planning solution; if there is no tax, this is the equivalence of a market equilibrium and social optinum. The equivalence result is used to deduce the implications of a partial tax reform policy. It is shown that a partial reform increases capital at each time following the initial period of the program.     

Accounting for the decline in Spanish household expenditures inequality during the 1980s

In this paper we apply decomposition methods to analyze some of the factors accounting for the decrease in household expenditures inequality in Spain during the 1980s. We adopt a simple one-parameter model in which equivalence scales depend only on household size. Then we propose an inequality decomposition method which minimizes equivalence scales' potential contamination problems. We find that most of the change in overall inequality is due to a reduction in the within-group term in the partition by household size. The bulk of this reduction is accounted for by changes at the lower tail of the distribution in the partitions by the socioeconomic category and educational level of the household head. These two findings are independent of the equivalence scales parameter.     

HOW DO SPOUSES SHARE THEIR FULL INCOME? IDENTIFICATION OF THE SHARING RULE USING SELF‐REPORTED INCOME

The paper applies the collective model to the analysis of intra-household inequality using one of the subjective-qualitative questions available in the RLMS (Russia Longitudinal Monitoring Survey) data, and provides a test for its assumptions. Interpreting the individual answers as reported budget scales we assume a correspondence between the budget level that household members report and their true income sharing. We first show that this assumption is supported by the data, and then use couples who report the same level of budget to identify the full sharing rule for the whole sample.     

Generalised cost scaling: A new approach to demographic variables in demand analysis

A new approach to modelling equivalence scales and household demand systems is introduced and its usefulness empirically demonstrated. The empirical results suggest that price effects on the general equivalence scale are more important than utility effect.     

Does the balance of power within a family matter? The case of the Retirement Equity Act

This paper studies within-family decision making regarding investment in income protection for surviving spouses using a simple and tractable Nash-bargaining model. A change in US pension law (the Retirement Equity Act of 1984) is used as an instrument to derive predictions from the bargaining model about the household demand for survivor annuities and life insurance and to contrast these with the predictions of the classical single-utility-function model of the household. In the empirical part of the paper, the predictions of the classical model are rejected in favor of the predictions of the Nash-bargaining model.     

The local Solow growth model

This paper generalizes the empirical analysis of the Solow growth model to account for country-specific heterogeneity. This generalization relaxes the assumption made in bulk of empirical growth studies that all countries possess identical aggregate production functions. Our empirical results indicate that there is substantial country-specific heterogeneity in the Solow parameters-heterogeneity that is associated with differences in initial income. We therefore conclude that the explanatory value of the Solow growth model is substantially enhanced by allowing for country-specific, i.e. local, production functions.