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IZA Discussion Paper No. 18941
September 2026
Individual-Level Inequality

Standard household-level data hide substantial heterogeneity in how consumption, money, and time are allocated within households. This motivates the need for measuring welfare at the individual level and a structural approach on how household data can be used to capture these differences. After documenting what can be learned from direct survey evidence, we present the collective approach as an attractive framework for modeling intra-household decision-making with preference heterogeneity, public consumption, and home production. We then survey three identification strategies that recover individual preferences and resource shares from widely available datasets: differential, revealed preference, and preference-similarity methods. Applying these tools reveals that a sizable share of overall inequality originates within households and that individual poverty rates often diverge sharply from household-level measures. Overall, our review demonstrates that measuring welfare at the individual level fundamentally reshapes our understanding of inequality, and offers practical guidance for incorporating intra-household heterogeneity into empirical welfare evaluations.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer-ext@liser.lu
+352 585-855-501
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Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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