Testing the Behavior of Romanian Households

This article aims to answer questions related to which model is more adequate to describe the Romanian household’s behavior. There are two types of models, which are used whenever one attempts to model household allocation decision: the common utility model and the collective model. In this paper we test both the implications of the common utility model and the implications of the collective model using Romanian household data. The results are very strong. The common utility model fails to describe accurately the household’s behavior, while the restrictions that the collective model imposes on the demand functions are supported by the Romanian household data.

Keywords: forecasting methods, DSGE models, Bayesian methods, real business cycles
JEL Classification: D12, D13