The measurement of household cost functions: revealed preference versus subjective measures.

The author examines how household cost functions depend on the composition of a household. "In the paper I formally establish the connection between subjective measures and the cost function underlying the AID [Almost Ideal Demand] system. The subjective measures fully identify cost functions and the expenditure data do this partly. This makes it possible to test the null hypothesis that both types of data are consistent with one another, i.e. that they measure the same thing. I use two separate data sets to set up a test of this equivalence. The outcomes are somewhat mixed and indicate the need for further specification search. Finally, I discuss some implications of the outcomes." excerpt