Income Shares and Shares of Income: Empirical Tests of Models of Household Resource Allocations

by Duncan Thomas, Chien-Lian Chen

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Abstract

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.

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