Estimating the economies of scale of living together and the sharing rule in a collective household model

Michael Gerfin 1, Aline BŁtikofer1
1University of Bern, Switzerland, 2IZA, Germany

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives’ contribution to household income and the duration of the relationship.

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