The more the poorer? Resource sharing and scale economies in large families

Abstract

In large families, individuals must share resources with many others but may benefit from economies of scale. This paper studies individual consumption in different types of households, with a focus on family structures that are common in developing countries. Based on a collective household model, we develop a methodology to identify intra-household resource allocation and the extent of joint consumption. Unlike existing approaches, we do not require consumption data on single-person households, which are rare in low-income countries. We illustrate our methodology using data from Bangladesh and Mexico. We document intra-household consumption inequality in both countries and substantial economies of scale in consumption in Mexico but not Bangladesh. Using our estimates, we then compute poverty rates for men, women, and children. Contrary to existing poverty calculations that ignore either intra-household inequality or economies of scale in consumption, ours account for both dimensions.