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The Economies of Scale of Living Together and How They Are Shared: Estimates Based on a Collective Household Model

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  • Bütikofer, Aline

    (Norwegian School of Economics)

  • Gerfin, Michael

    (University of Bern)

Abstract

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives' contribution to household income and the duration of the relationship.

Suggested Citation

  • Bütikofer, Aline & Gerfin, Michael, 2009. "The Economies of Scale of Living Together and How They Are Shared: Estimates Based on a Collective Household Model," IZA Discussion Papers 4327, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4327
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    1. Daniel Burkhard, 2017. "Allocation of Expenditures in Elderly Households and the Cost of Widowhood," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 153(4), pages 371-401, October.
    2. Susanne Elsas, 2021. "Causality in the Link between Income and Satisfaction: IV Estimation with Internal Instruments," SOEPpapers on Multidisciplinary Panel Data Research 1143, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Menon, Martina & Pendakur, Krishna & Perali, Federico, 2012. "On the expenditure-dependence of children’s resource shares," Economics Letters, Elsevier, vol. 117(3), pages 739-742.
    4. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    5. Melanie Borah, 2020. "Estimating Extended Income Equivalence Scales from Income Satisfaction and Time Use Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(2), pages 687-718, June.
    6. Amy Farmer & Andrew Horowitz, 2015. "Strategic non-marital cohabitation: theory and empirical implications," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(1), pages 219-237, January.
    7. Joshua Berning & Rebecca Cleary & Alessandro Bonanno, 2023. "Food insecurity and time use in elderly vs. non‐elderly: An exploratory analysis," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 280-299, March.
    8. Botha, Ferdi & Ribar, David C., 2023. "For worse? Financial hardships and intra-household resource allocation among Australian couples," Economic Modelling, Elsevier, vol. 119(C).
    9. Fernando Alexandre & Pedro Bação & Miguel Portela, 2020. "Is the basic life-cycle theory of consumption becoming more relevant? Evidence from Portugal," Review of Economics of the Household, Springer, vol. 18(1), pages 93-116, March.
    10. Martin Beznoska, 2024. "Testing the Income Pooling Hypothesis and its Link to the Taxation of Couple Households: Evidence from Demand System Estimation for Germany," Journal of Family and Economic Issues, Springer, vol. 45(3), pages 687-719, September.
    11. Miriam Rehm & Alyssa Schneebaum & Barbara Schuster, 2022. "Intra-Couple Wealth Inequality: What’s Socio-Demographics Got to Do with it?," European Journal of Population, Springer;European Association for Population Studies, vol. 38(4), pages 681-720, October.

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    More about this item

    Keywords

    equivalence scale; sharing rule; collective household models; subjective data;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D19 - Microeconomics - - Household Behavior - - - Other

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