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Household Cost Functions and Equivalence Scales

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  • Bernard M. S. van Praag
  • Nico L. van der Sar

Abstract

We describe a simple method to estimate household cost functions and family equivalence scales. It is an alternative to standard methods as it does not assume strong postulates about utility maximization nor any functionally specified model equations. The data requirements are extremely modest. We assume interpersonal ordinal comparability in the sense of Sen (1976) and use empirical evidence for eight European countries and the U.S. to show the feasibility of the method and the stability of its results. We also show that subjective data like those provided by income evaluation questions may be used without adopting a cardinal utility framework.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 23 (1988)
Issue (Month): 2 ()
Pages: 193-210

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Handle: RePEc:uwp:jhriss:v:23:y:1988:i:2:p:193-210

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Web page: http://jhr.uwpress.org/

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Cited by:
  1. Charlier, E., 1997. "Limited Dependent Variable Models for Panel Data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-74022, Tilburg University.
  2. repec:dgr:uvatin:2097119 is not listed on IDEAS
  3. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
  4. Aguilar, Alexandra Cortés & García Muñoz, Teresa M. & Moro-Egido, Ana I., 2013. "Heterogeneous self-employment and satisfaction in Latin America," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 44-61.
  5. Cortés Aguilar Alexandra & Teresa Garcia-Muñoz & Ana I. Moro Egido, 2013. "Heterogeneous Self-employment and Subjective Well-Being. Evidence from Latin America," ThE Papers 13/05, Department of Economic Theory and Economic History of the University of Granada..
  6. Melenberg, B. & Soest, A.H.O. van, 1996. "Measuring the costs of children: Parametric and semiparametric estimators," Open Access publications from Tilburg University urn:nbn:nl:ui:12-72215, Tilburg University.
  7. Bernard M.S. van Praag, 2007. "Perspectives from the Happiness Literature and the Role of New Instruments for Policy Analysis," Tinbergen Institute Discussion Papers 07-049/3, Tinbergen Institute.
  8. Melenberg, B. & Soest, A.H.O. van, 1995. "Semiparametric estimation of equivalence scales using subjective information," Discussion Paper 1995-71, Tilburg University, Center for Economic Research.
  9. Bigsten, Arne & Shimeles, Abebe, 2004. "Prospects for 'Pro-Poor' Growth in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Plug, Erik J. S. & van Praag, Bernard M. S. & Hartog, Joop, 1999. "If we knew ability, how would we tax individuals?," Journal of Public Economics, Elsevier, vol. 72(2), pages 183-211, May.
  11. Christos Koulovatianos & Carsten Schroder & Ulrich Schmidt, 2004. "On the Income Dependence of Equivalence Scales," University of Cyprus Working Papers in Economics 1-2004, University of Cyprus Department of Economics.
  12. Bonsang Eric & Soest Arthur van, 2010. "Satisfaction with job and income among older individuals across European countries," Research Memorandum 059, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  13. Bernard M.S. van Praag & P. Frijters, 1997. "Choice Behaviour and Verbal Behaviour: A Critical Assessment of their Relevance for Practical Policy," Tinbergen Institute Discussion Papers 97-119/1, Tinbergen Institute.
  14. Olken, Benjamin A., 2005. "Revealed community equivalence scales," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 545-566, February.
  15. Bernard M.S. van Praag & P. Frijters, 1997. "Choice Behaviour and Verbal Behaviour: A Critical Assessment of their Relevance for Practical Policy," Tinbergen Institute Discussion Papers 97-119/1, Tinbergen Institute.
  16. Plug, Erik J. S. & Van Praag, Bernard M. S., 1998. "Similarity in response behavior between household members: An application to income evaluation," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 497-513, August.
  17. Charlier, E., 1997. "Equivalence Scales for the Former West Germany," Discussion Paper 1997-74, Tilburg University, Center for Economic Research.

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