A common approach to analysing inequality focuses on household income and assumes the absence of intra-household inequality and homogenous equivalence scales. To study the role of these assumptions, I build a model of household decision-making and the marriage market. I estimate the model using British data and use it to measure individual well-being in terms of the Money-Metric Welfare Index (MMWI, Chiappori and Meghir (2015)). Comparing inequality in individual-level welfare and household-level income, I find that welfare inequality is 11% lower than income inequality. Intra-household inequality accounts for 21% of welfare inequality and heterogeneity in economies of scale for 15%.
JEL classification: E21, I32, D13, D63
Tim Obermeier
18 October 2023 Paper Number POIDWP082
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