Using household budget survey data from Taiwan, this paper tests an implication of the common preference model: that is, shifting the distribution of resources within the household should have no impact on household commodity demand. For some goods, this implication is rejected by the data. We turn, therefore, to a more general individualistic model of the household and determine whether the data are consistent with household members choosing allocations Pareto efficiently. Treating household income as endogenous (or measured with error) the answer is an unambiguously affirmative and our evidence for Taiwan is consistent with empirical results reported for France (in Bourguignon, Browning, Chiappori and Lechene, 1993) and for Canada (in Browning, Bourguignon, Chiappori and Lechene, 1993). There is some suggestion that the common preference model may not be rejected for all sub-groups in the data and so the final section of the paper attempts to identify some of the characteristics of these households.
This report is part of the RAND Corporation draft series. The unrestricted draft was a product of the RAND Corporation from 1993 to 2003 that represented preliminary or prepublication versions of other more formal RAND products for distribution to appropriate external audiences. The draft could be considered similar to an academic discussion paper. Although unrestricted drafts had been approved for circulation, they were not usually formally edited or peer reviewed.
This research in the public interest was supported by RAND, using discretionary funds made possible by the generosity of RAND's donors, the fees earned on client-funded research, and independent research and development (IR&D) funds provided by the Department of Defense.
Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.