Estimation of the Sharing Rule Between Adults and Children and Related Equivalence Scales Within a Collective Consumption Framework

Atella VincenzoPerali FedericoArias CarlosCastagnini Raffaella
CEIS Research Paper
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.
Number: 28
Keywords: Collective Approach, Sharing Rule, Clothing, Equivalence Scales
Date: Sunday 30 November 2003
Revision Date: Sunday 30 November 2003