Confronting the Representative Consumer with Household-Size Heterogeneity

Christos Koulovatianos, Carsten Schröder, Ulrich Schmidt
2010 Social Science Research Network  
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more » ... bedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 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 microlevel heterogeneity is household size, as individuals living in multi-member households have the potential to share goods within the household, bene...ting from household-size economies. Theoretically, we show that validating the role of a representative consumer would require that the way individuals bene...t 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 ...nd that it holds.
doi:10.2139/ssrn.1679795 fatcat:zsmi4hsj5zeezbtrynxosnztzi