Estimation of the Sharing Rule between Adults and Children and Related Equivalence Scales within a Collective Consumption Framework

34 Pages Posted: 28 Jul 2003

See all articles by Vincenzo Atella

Vincenzo Atella

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS); Department of Economics and Finance; University of Rome Tor Vergata - Faculty of Economics

Carlos Arias

Universidad de León

Federico Perali

University of Verona - Department of Economics

Raffaella Castagnini

World Bank

Date Written: July 2003

Abstract

In order to determine how much money is needed to make each household member as well off as they were before a change in living conditions, equivalence scales should be defined on the basis of individual rather than household welfare. This requires the knowledge of individual utilities that are derivable from the identification of the rule governing the intra-household allocation of resources within a collective approach. We pursue this objective using information about male, female and children clothing expenditure present in the 1999 Italian Household budget survey within the estimation of a complete demand system. The sharing rule between adults and children is estimated using a structural rather than a reduced form approach. Maximum simulated likelihood is used to estimate a collective model of individual demand equations with zero expenditures for the exclusive good clothing. The recovery of individual utilities for adults and children permits the estimation of the cost of children taking the intra-household distribution of resources into account. We show that the cost of Italian children is significantly affected by the parents' aversion to intra-household inequality.

Keywords: Collective Approach, Sharing Rule, Clothing, Equivalence Scales

Suggested Citation

Atella, Vincenzo and Arias Sampedro, Carlos and Perali, Federico and Castagnini, Raffaella, Estimation of the Sharing Rule between Adults and Children and Related Equivalence Scales within a Collective Consumption Framework (July 2003). Available at SSRN: https://ssrn.com/abstract=428540 or http://dx.doi.org/10.2139/ssrn.428540

Vincenzo Atella (Contact Author)

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

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Department of Economics and Finance ( email )

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Carlos Arias Sampedro

Universidad de León ( email )

Campus de Vegazana
24071 Leon
Spain

Federico Perali

University of Verona - Department of Economics ( email )

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I-37129 Verona
Italy

Raffaella Castagnini

World Bank ( email )

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Washington, DC 20433
United States