Economic well-being and poverty among the elderly: an analysis based on a collective consumption model

  • Bram de Rock Bram de Rock
  • Frederic Vermeulen Frederic Vermeulen
  • Laurens Cherchye Laurens Cherchye

We apply the collective consumption model of Browning, Chiappori and Lewbel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series ofDutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife’s share that is increasing in total expenditures.We further calculated poverty rates by means of the collective consumption model.Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overestimated) by the traditional approach. Finally, we analysed the impact of becominga widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband’s death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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