A Collective Model of Household Behavior with Private and Public Goods: Theory and Evidence from US Data

In this paper, we adopt the collective approach to consumer behavior --- which supposes that each household member is characterized by his/her own preferences and the decision process results in Pareto-efficient outcomes --- and assume, in addition, that agents are egoistic and consumption is either private or public. The main results are based on a conditional demand (`m-demand') framework where household demands are directly derived from the marginal rates of substitution. We show that (i) household demands have to satisfy testable constraints and (ii) some elements of the decision process can be retrieved from observed behavior. These theoretical considerations are followed by an empirical application using the U.S. Consumer Expenditure Survey. It turns out that the data are overall consistent with the theoretical model