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Using Panel Data on Income Satisfaction to Estimate the Equivalence Scale Elasticity

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Author Info
Johannes Schwarze
Abstract

In this paper a new method to estimate the equivalence scale elasticity using individual panel data on income satisfaction will be developed. In contrast to other subjective approaches, the present one benefits from the fact that no direct cardinal individual welfare function has to be specified. In addition, panel data enables different scale use by the respondents to be controlled. The approach gives straightforward evidence: Obviously there is an optimal elasticity at which people feel satisfied with their income.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 227.

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Length: 11 p.
Date of creation: 2000
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Handle: RePEc:diw:diwwpp:dp227

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Related research
Keywords: equivalence scales; income satisfaction; panel data;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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  1. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Blackwell Publishing, vol. 44(2), pages 77-124, April.
  2. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September. [Downloadable!] (restricted)
  3. van Praag, Bernard M S & Hagenaars, Aldi J M & van Weeren, Hans, 1982. "Poverty in Europe," Review of Income and Wealth, Blackwell Publishing, vol. 28(3), pages 345-59, September.
  4. Bruno S. Frey & Alois Stutzer, 2000. "Maximising Happiness?," German Economic Review, Blackwell Publishing, vol. 1(2), pages 145-167, 05. [Downloadable!] (restricted)
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  5. Aaberge, Rolf & Melby, Ingrid, 1998. "The Sensitivity of Income Inequality to Choice of Equivalence Scales," Review of Income and Wealth, Blackwell Publishing, vol. 44(4), pages 565-69, December.
  6. Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October. [Downloadable!] (restricted)
  7. Nelson, Julie A, 1992. "Methods of Estimating Household Equivalence Scales: An Empirical Investigation," Review of Income and Wealth, Blackwell Publishing, vol. 38(3), pages 295-310, September.
  8. Burkhauser, Richard V & Smeeding, Timothy M & Merz, Joachim, 1996. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," Review of Income and Wealth, Blackwell Publishing, vol. 42(4), pages 381-400, December.
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  9. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 471-93, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bruno Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Pérez Truglia, Ricardo Nicolás, 2007. "Can a rise in income inequality improve welfare?," MPRA Paper 4700, University Library of Munich, Germany, revised 22 Dec 2007. [Downloadable!]
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