March 2006

IZA DP No. 2004: Nonparametric Analysis of Household Labor Supply: Goodness-of-Fit and Power of the Unitary and the Collective Model

published in: Review of Economics and Statistics, 2008, 90 (2), 267-274

We compare the empirical performance of unitary and collective labor supply models, using representative data from the Dutch DNB Household Survey. We conduct a nonparametric analysis that avoids the distortive impact of an erroneously specified functional form for the preferences and/or the intrahousehold bargaining process. Our analysis focuses on the goodness-of-fit of the two behavioral models. To guarantee a fair comparison, we complement this goodness-of-fit analysis with a power analysis. Our results strongly favor the collective approach to modeling the behavior of multi-person households.