IZA DP No. 9002: How Falsifiable is the Collective Model? A New Test with an Application to Monogamous and Bigamous Households in Burkina Faso
published as ' Is Consumption Efficiency within Househols Falsifiable?' in: Review of Economics of the Household, 2018, 16 (3), 737 - 766 http://dx.doi.org/10.1007/s11150-016-9359-4
Collective rationality is seldom if ever rejected in the literature, raising doubt about its falsifiability. We show that the standard approach to test the collective model with distribution factors may yield misleading inference. We generalize the model and provide an appropriate test procedure to assess its validity. Our new approach extends to households that include more than two decision-makers (e.g., polygamous households, adult children). We investigate household consumption decision-making within monogamous and bigamous households in Burkina Faso. Using the standard testing approach, collective rationality within monogamous households is not rejected. Using our proposed test procedure, collective rationality is however rejected for monogamous households. Furthermore, our test also rejects collective rationality for bigamous households. We conclude that the household efficiency does yield empirically falsifiable restrictions despite being scarcely rejected in the literature.