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Income-Dependent Equivalence Scales and Choice Theory: Implications for Poverty Measurement

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  • Christos Koulovatianos
  • Carsten Schröder

Abstract

Equivalence Scales are a tool for removing the heterogeneity of household sizes in the measurement of inequality, and affect poverty assessments and poverty lines. We address the disadvantage that poor households may suffer due to their reduced ability to share goods within the household. This disadvantage is important to estimate and embed in standard analysis, as it seems to have a substantial quantitative impact on the measurement of poverty. We also suggest that future research on the role of subsistence incomes of different household types in utility functions may shed light on explanations for poverty and may guide anti-poverty policies.

Suggested Citation

  • Christos Koulovatianos & Carsten Schröder, 2022. "Income-Dependent Equivalence Scales and Choice Theory: Implications for Poverty Measurement," Discussion Papers of DIW Berlin 1991, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1991
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    References listed on IDEAS

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    More about this item

    Keywords

    Equivalent incomes; household-size economies; inequality; demographics and poverty; child costs; Generalized Equivalence Scale Exactness;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving

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