Nonparametric tests of collectively rational consumption behavior: An integer programming procedure |
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| Authors: | Laurens Cherchye Bram De Rock Jeroen Sabbe Frederic Vermeulen |
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| Affiliation: | 1. University of Leuven, Campus Kortrijk and Center for Economic Studies, Fund for Scientific Research - Flanders (FWO-Vlaanderen). E. Sabbelaan 53, B-8500 Kortrijk, Belgium;2. European Center for Advanced Research in Economics and Statistics (ECARES), Université Libre de Bruxelles, and ECORE. Avenue F. D. Roosevelt 50, CP 114, B-1050 Brussels, Belgium;3. Netspar, CentER, Tilburg University, P.O. Box 90153, NL-5000 LE Tilburg, The Netherlands |
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| Abstract: | We present an IP-based nonparametric (revealed preference) testing procedure for rational consumption behavior in terms of a general collective model, which includes consumption externalities and public consumption. An empirical application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the practical usefulness of the procedure. Finally, we present extensions of the testing procedure to evaluate the goodness-of-fit (accounting for optimization error as well as measurement error) of the collective model subject to testing. |
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| Keywords: | D11 D12 C14 |
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