The influence of demographic and household specific price indices on expenditure based inequality and welfare: a comparison of Spain and the United States

The purpose of this research is to examine the role of household size and household specific price indices on inequality and welfare measurement in Spain and the O.S. Total household expenditures from each countries' 1990-91 consumer expenditure surveys, with adjustments to reflect more accurately households' current consumption, are used as the basis for the analysis. Household size scale factors are used to produce adjusted expenditures. Household specific price indices are used to expresss the 1990-91 expenditure distribution at winter of 1981 and winter of 1991 prices. Decomposable measurement instruments are used both for the inequality and social welfare analyses. Our results show that wide differences in household size can be very important in international comparisons. Inequality and welfare comparisons are drastically different for smaller and larger households. For both countries we find that from the point of view of winter 1981, the amount of expenditures that we would need to give to richer households to compensate them for inflation, over the 1981 to 1991 period, would be greater than the amount that we would need to give to poorer households for them to be able to acquire the same bundle of goods. Our inequality comparisons are robust to the choice of the reference price vector.