Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure

L.J.H. Cherchye, B. de Rock, J. Sabbe, F.M.P. Vermeulen

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Abstract

We present an IP-based nonparametric (revealed preference) testing proce- dure for rational consumption behavior in terms of general collective models, which include consumption externalities and public consumption. An empiri- cal application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the practical usefulness of the procedure. Finally, we present extensions of the testing procedure to evaluate the goodness-of-fit of the collective model subject to testing, and to quantify and improve the power of the corresponding collective rationality tests.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages31
Volume2008-2
Publication statusPublished - 2008

Publication series

NameCentER Discussion Paper
Volume2008-2

Keywords

  • collective consumption model
  • revealed preferences
  • nonparametric rationality tests
  • integer programming (IP)

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