Heterogeneous households

Hi everybody,

I have a model with different types of households. For each type of household I assign a share in total population. This share can evolve through time. When rescaling the results from the model to get total consumption of one type of household, and to do a welfare analysis via the consumption equivalence approach, should I multiply the consumption of that household by its share in total economy ? Or should I just interpret the dynamics of households’ decisions without weighted them by their share in total population ?

Thank you

There is probably no general answer. I guess it depends on the question you are trying answer. Ultimately, it will most likely depend on the social welfare function you have in mind.

Thank you @jpfeifer . Because actually, one type of household sees its share increase a lot through the years, and its consumption decrease, but in total if I multiply its share in population by the value of its consumption total consumption of this group increases.

I followed the standatd agregation: total consomptuion : weighted sum of the different households by their share in total population.

For now I use a very rough approximation via the CRRA utility, and I make sure that the changes are in steady state consumption equivalent.