Intrahousehold Resource Allocation and Individual Poverty: Assessing Collective Model Predictions using Direct Evidence on Sharing

Welfare analyses conducted by policy practitioners around the world usually rely on equivalised or per capita expenditures and ignore the extent of within-household inequality. Recent advances in the estimation of collective models suggest ways to retrieve the complete sharing process within families using homogeneity assumptions (typically preference stability upon exclusive goods across individuals or household types) and the observation of exclusive goods. So far, the prediction of these models has not been validated, essentially because intrahousehold allocation is seldom observed. We provide such a validation by leveraging a unique dataset from Bangladesh, which contains information on the fully individualised expenditures of each family member. We also test the core assumption (efficiency) and homogeneity assumptions used for identification. It turns out that the collective model predicts individual resources reasonably well when using clothing, i.e., one of the rare goods commonly assignable to males, females and children in standard expenditure surveys. It also allows for identifying poor individuals in non-poor households, while the traditional approach understates poverty among the poorest individuals.