Confronting the Representative Consumer with Household-Size Heterogeneity

Christos Koulovatianos, Carsten Schröder and Ulrich Schmidt

No 1056, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Much analysis in macroeconomics empirically addresses economy-wide incentives behind consumer/investment choices by using insights from the way a single representative household would behave. Heterogeneity at the micro level can jeopardize attempts to back up the representative consumer construct with microfoundations. One complex aspect of micro-level heterogeneity is household size, as individuals living in multi-member households have the potential to share goods within the household, benefiting from household-size economies. Theoretically, we show that validating the role of a representative consumer would require that the way individuals benefit from intra-household sharing is strictly aligned across the rich and the poor: once expenditures for subsistence needs are subtracted from disposable household income, household-size economies the remainder (discretionary) household incomes entail must be the same across the rich and the poor. We have designed a survey method that allows the testing of this stringent property of intra-household sharing and find that it holds.

Keywords: Linear Aggregation; Equivalent Expenditures; Survey Method; Household-Size Economies (search for similar items in EconPapers)
JEL-codes: C83 D11 D12 D31 D91 E1 E21 I32 (search for similar items in EconPapers)
Pages: 49 , Anh. p.
Date: 2010
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Related works:
Working Paper: Confronting the Representative Consumer with Household-Size Heterogeneity (2014)
Working Paper: Confronting the representative consumer with household-size heterogeneity (2010)
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