Review of Economics of the Household

, Volume 4, Issue 2, pp 113–127 | Cite as

Collective Models of Labor Supply with Nonconvex Budget Sets and Nonparticipation: A Calibration Approach

  • Frederic VermeulenEmail author
  • Olivier Bargain
  • Miriam Beblo
  • Denis Beninger
  • Richard Blundell
  • Raquel Carrasco
  • Maria-Concetta Chiuri
  • François Laisney
  • Valérie Lechene
  • Nicolas Moreau
  • Michal Myck
  • Javier Ruiz-Castillo


We suggest a methodology to calibrate a collective model with household-specific bargaining rules and marriage-specific preferences that incorporate leisure externalities. The empirical identification relies on the assumption that some aspects of individual preferences remain the same after marriage, so that estimation on single individuals can be used. The procedure maps the complete Pareto frontier of each household in the dataset and we define alternative measures of a power index. The latter is then regressed on relevant bargaining factors, including a set of variables retracing the potential relative contributions of the spouses to household disposable income. In its capacity to handle complex budget sets and labor force participation decisions of both spouses, this framework allows the comparison of unitary and collective predictions of labor supply reactions and welfare changes entailed by fiscal reforms in a realistic setting (see Michal Myck et al., 2006; Denis Beninger et al., 2006).


Collective model Household labor supply Intrahousehold allocations Tax reform 

JEL Classification

D11 D12 J22 



This paper exploits work done in the one-year project “Welfare analysis of fiscal and social security reforms in Europe: does the representation of family decision processes matter?”, partly financed by the EU, General Directorate Employment and Social Affairs, under Grant VS/2000/0778. We are grateful for comments and advice from the Editors, anonymous referees, François Bourguignon, Martin Browning, Pierre-André Chiappori, Olivier Donni, Andreas Krüpe, Jason Lee, Ernesto Longobardi, Isabelle Maret, Costas Meghir, Nathalie Picard, Hubert Stahn, Ian Walker and Bernarda Zamora, as well as participants in conferences and seminars too numerous to be quoted here. The usual disclaimer applies.


  1. Apps, P. (2003). Gender, time use and models of the household. IZA Discussion Paper 796. Bonn: IZA.Google Scholar
  2. Apps, P., & Rees, R. (1988). Taxation and the household. Journal of Public Economics, 35, 355–369.CrossRefGoogle Scholar
  3. Apps, P., & Rees, R. (2001). Household production, full consumption and the costs of children. Labour Economics, 8, 621–648.CrossRefGoogle Scholar
  4. Bargain, O., Beninger, D., Laisney, F., & Moreau, N. (2002). Positive and normative analysis of tax policy: Does the representation of the household decision process matter? Evidence for France. Paper presented at the EEA’02 meeting in Venice.Google Scholar
  5. Barmby, T., & Smith, N. (2001). Household labour supply in Britain and Denmark: Some interpretation using a model of Pareto optimal behavior. Applied Economics, 33, 1109–1116.Google Scholar
  6. Beblo, M. (2001). Die Freizeitlücke zwischen erwerbstätigen Müttern und Vätern - Ein ö konomischer Erklärungsversuch mit Daten der deutschen Zeitbudgeterhebung 1991/92. In M. Ehling, J. Merz et al. (Eds.), Zeitbudget in Deutschland – Erfahrungsberichte der Wissenschaft. Wiesbaden: Statistisches Bundesamt.Google Scholar
  7. Beninger, D. (2000). Collective models: Introduction of the taxation. Mimeo, Mannheim: ZEW.Google Scholar
  8. Beninger, D., Laisney, F., & Beblo, M. (2002). Welfare analysis of fiscal reforms: Does the representation of the family decision process matter? Evidence for Germany. Mimeo, Mannheim: ZEW.Google Scholar
  9. Beninger, D., Bargain, O., Beblo, M., Blundell, R., Carrasco, R., Chiuri, M.-C., Laisney, F., Lechene, V., Longobardi, E., Myck, M., Moreau, N., Ruiz-Castillo, J., & Vermeulen, F. (2006). Evaluating the move to a linear tax system in Germany and other European countries: The choice of the representation of household decision processes does matter.Review of Economics of the Household, 4, 159–180.Google Scholar
  10. Bhattarai, K., & Whalley, J. (1997). Discreteness and the welfare cost of labor supply tax distortions. NBER Working Paper 6280. Cambridge Massachusetts: National Bureau of Economic Research.Google Scholar
  11. Bingley, P., & Walker, I. (1997). The labour supply, unemployment, and participation of lone mothers in in-work transfer programs. Economic Journal, 107, 1375–1390.CrossRefGoogle Scholar
  12. Blundell, R., Duncan, A., & Meghir, C. (1998). Estimating labour supply responses using tax reforms. Econometrica, 66, 827–861.Google Scholar
  13. Blundell, R., Lechene, V., & Myck, M. (2002). Does the representation of family decision processes matter? Collective decisions and fiscal reforms in the UK. Mimeo, London: IFS.Google Scholar
  14. Blundell, R., Chiappori, P.-A., Magnac, T., & Meghir, C. (2001). Collective labour supply: Heterogeneity and non-participation. IFS Working Paper WP01/19. London: IFS.Google Scholar
  15. Browning, M., & Chiappori, P.-A. (1998). Efficient intra-household allocations: A general characterization and empirical tests. Econometrica, 66, 1241–1278.Google Scholar
  16. Browning, M., & Gørtz, M. (2005). Spending time and money within the household. Mimeo, Copenhagen: CAM.Google Scholar
  17. Browning, M.,& Lechene, V. (2001). Caring and sharing: Tests between alternative models of intra-household allocation. Oxford Economics Discussion Paper Series 70. Oxford: University of Oxford.Google Scholar
  18. Browning, M., Chiappori, P.-A., & Lechene, V. (2006). Collective and unitary models: A clarification. Review of Economics of the Household, 4, 5–14.CrossRefGoogle Scholar
  19. Browning, M., Chiappori, P.-A., & Lewbel, A. (2004). Estimating consumption economies of scale, adult equivalence scales, and household bargaining power. Mimeo, Boston: Boston College.Google Scholar
  20. Carrasco, R., & Ruiz-Castillo, J. (2002). Does the representation of the family decision process matter? A collective model of household labor supply for the evaluation of a personal tax reform in Spain. Mimeo, Madrid: Universidad Carlos III.Google Scholar
  21. Chiappori, P.-A. (1988). Rational household labor supply. Econometrica, 56, 63–89.Google Scholar
  22. Chiappori, P.-A. (1992). Collective labor supply and welfare. Journal of Political Economy, 100, 437–467.CrossRefGoogle Scholar
  23. Chiappori, P.-A., Fortin, B., & Lacroix, G. (2002). Marriage market, divorce legislation and household labor supply. Journal of Political Economy, 110, 37–72.CrossRefGoogle Scholar
  24. Chiuri, M.-C., & Longobardi, E. (2002). Welfare analysis of fiscal reforms in Europe: Does the representation of family decision processes matter? Evidence from Italy. Mimeo, Bari: University of Bari.Google Scholar
  25. Dauphin, A., El Lahga, A.R., Fortin, B., & Lacroix, G. (2006). Choix de Consommation des Ménages en Pr ésence de Plusieurs Décideurs. Forthcoming in L’Actualité Économique.Google Scholar
  26. Donni, O. (2003). Collective household labor supply: Non-participation and income taxation. Journal of Public Economics, 87, 1179–1198.CrossRefGoogle Scholar
  27. Donni, O. (2004). A note on the collective model of labor supply with domestic production. Mimeo, Cergy-Pontoise: Université de Cergy-Pontoise.Google Scholar
  28. Fong, Y., & Zhang, J. (2001). The identication of unobservable independent and spousal leisure. Journal of Political Economy, 109, 191–202.CrossRefGoogle Scholar
  29. Fortin, B., & Lacroix, G. (1997). A test of the neo-classical and collective models of household labour supply. Economic Journal, 107, 933–955.CrossRefGoogle Scholar
  30. Heckman, J., & Singer, B. (1984). A method for minimizing the impact of distributional assumptions in econometric models of duration data. Econometrica, 52, 271–320.Google Scholar
  31. Hoynes, H. (1996). Welfare transfers in two-parent families: Labor supply and welfare participation under AFDC-UP. Econometrica, 64, 295–332.Google Scholar
  32. Lewbel, A. (2000). Two stage least squares estimation of endogeneous sample selection models. Mimeo, Boston: Boston College.Google Scholar
  33. Lundberg, S., Pollak, R., Wales, T. (1997). Do husbands and wives pool their resources? Evidence from the UK child benefit. Journal of Human Resources, 32, 463–480.CrossRefGoogle Scholar
  34. Manser, M., & Brown, M. (1980). Marriage and household decision making: A bargaining analysis. International Economic Review, 21, 31–44.Google Scholar
  35. Mas-Colell, A., Whinston, M., & Green, J. (1995). Microeconomic theory. Oxford: Oxford University Press.Google Scholar
  36. McFadden, D., & Train, K. (2000). Mixed MNL models of discrete response. Journal of Applied Econometrics, 15, 447–470.CrossRefGoogle Scholar
  37. Moreau, N., & Donni, O. (2002). Une Estimation d’un Modèle Collectif d’Offre de Travail avec Taxation. Annales d’Économie et de Statistique, 65, 55–83.Google Scholar
  38. Myck, M., Bargain, O., Beblo, M., Beninger, D., Blundell, R., Carrasco, R., Chiuri, M.C., Laisney, F., Lechene, V., Longobardi, E., Moreau, N., Ruiz-Castillo, J., & Vermeulen, F. (2006). Who receives the money matters: Simulating the working families’ tax credit in the UK and some European tax reforms. Review of Economics of the Household, 4, 129–158.Google Scholar
  39. Small, K., & Rosen, S. (1981). Applied welfare economics with discrete choice models. Econometrica, 49, 105–130.Google Scholar
  40. Van Soest, A. (1995). Structural models of family labor supply: A discrete choice approach. Journal of Human Resources, 30, 63–88.CrossRefGoogle Scholar
  41. Vermeulen, F. (2002). Where does the unitary model go wrong? Simulating tax reforms by means of unitary and collective labour supply models. The case for Belgium. Mimeo, Leuven: University of Leuven.Google Scholar
  42. Vermeulen, F. (2005). And the winner is ... an empirical evaluation of unitary and collective labour supply models. Empirical Economics, 30, 711–734.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Frederic Vermeulen
    • 1
    Email author
  • Olivier Bargain
    • 2
    • 3
  • Miriam Beblo
    • 4
  • Denis Beninger
    • 4
  • Richard Blundell
    • 5
    • 6
  • Raquel Carrasco
    • 7
  • Maria-Concetta Chiuri
    • 3
    • 8
  • François Laisney
    • 4
    • 9
  • Valérie Lechene
    • 5
    • 10
  • Nicolas Moreau
    • 11
  • Michal Myck
    • 5
    • 12
  • Javier Ruiz-Castillo
    • 7
  1. 1.Tilburg UniversityTilburgNetherlands
  2. 2.IZABonnGermany
  3. 3.CHILDTurinItaly
  4. 4.ZEWMannheimGermany
  5. 5.IFSLondonUK
  6. 6.UCLLondonUK
  7. 7.Universidad Carlos IIIMadridSpain
  8. 8.Universitá di BariBariItaly
  9. 9.BETA-ThemeULPStrasbourgFrance
  10. 10.Wadham CollegeOxfordEngland
  11. 11.GREMAQ and LIRHEToulouseFrance
  12. 12.DIWBerlinGermany

Personalised recommendations