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Two can live as cheaply as one... but three's a crowd

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  • Bollinger, Christopher R.
  • Nicoletti, Cheti
  • Pudney, Stephen

Abstract

To measure poverty, incomes must be equivalized across households with different structures. In this paper, we use a very flexible ordered response model to analyze the relationship between income, demographic structure and subjective assessments of financial wellbeing drawn from the 1991-2008 British Household Panel Survey. Our results suggest the existence of large scale economies within marital/cohabiting couples, but substantial diseconomies from the addition of children or further adults. This pattern contrasts sharply with commonly-used equivalence scales, and is consistent with explanations in terms of the capital requirements associated with additions to the core couple.

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Bibliographic Info

Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2012-10.

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Date of creation: 29 May 2012
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Publication status: published
Handle: RePEc:ese:iserwp:2012-10

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
Fax: 44-1206-873151
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Web page: https://www.iser.essex.ac.uk/
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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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Web: https://www.iser.essex.ac.uk/publications/

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References

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  1. Bargain, Olivier & Donni, Olivier, 2009. "The Measurement of Child Costs: A Rothbarth-Type Method Consistent with Scale Economies," IZA Discussion Papers 4654, Institute for the Study of Labor (IZA).
  2. Guido Heineck & Silke Anger, 2008. "The Returns to Cognitive Abilities and Personality Traits in Germany," Discussion Papers of DIW Berlin 836, DIW Berlin, German Institute for Economic Research.
  3. Ravallion, Martin & Lokshin, Michael, 2001. "Identifying Welfare Effects from Subjective Questions," Economica, London School of Economics and Political Science, vol. 68(271), pages 335-57, August.
  4. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  5. Praag, B.M.S. van & Kapteyn, A.J., 1976. "A new approach to the construction of family equivalence scales," Open Access publications from Tilburg University urn:nbn:nl:ui:12-361896, Tilburg University.
  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. Pudney, Stephen, 2011. "Perception and retrospection: The dynamic consistency of responses to survey questions on wellbeing," Journal of Public Economics, Elsevier, vol. 95(3), pages 300-310.
  8. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  9. Charlier, Erwin, 2002. "Equivalence Scales in an Intertemporal Setting with an Application to the Former West Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 99-126, March.
  10. Baetschmann, Gregori & Staub, Kevin & Winkelmann, Rainer, 2011. "Consistent Estimation of the Fixed Effects Ordered Logit Model," IZA Discussion Papers 5443, Institute for the Study of Labor (IZA).
  11. Dickens, Richard & Fry, Vanessa & Pashardes, Panos, 1993. "Non-linearities and Equivalence Scales," Economic Journal, Royal Economic Society, vol. 103(417), pages 359-68, March.
  12. Paolo Figini, 1998. "Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition," Economics Technical Papers 988, Trinity College Dublin, Department of Economics.
  13. Mathilde Almlund & Angela Lee Duckworth & James J. Heckman & Tim D. Kautz, 2011. "Personality Psychology and Economics," NBER Working Papers 16822, National Bureau of Economic Research, Inc.
  14. Cobb-Clark, Deborah A. & Schurer, Stefanie, 2012. "The stability of big-five personality traits," Economics Letters, Elsevier, vol. 115(1), pages 11-15.
  15. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
  16. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  17. Menno Pradhan & Martin Ravallion, 2000. "Measuring Poverty Using Qualitative Perceptions Of Consumption Adequacy," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 462-471, August.
  18. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, . "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," CAM Working Papers 2003-12, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Dec 2003.
  19. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-42, June.
  20. Beegle, Kathleen & Himelein, Kristen & Ravallion, Martin, 2012. "Frame-of-reference bias in subjective welfare," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 556-570.
  21. Muellbauer, John, 1979. "McClements on equivalence scales for children," Journal of Public Economics, Elsevier, vol. 12(2), pages 221-231, October.
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Cited by:
  1. Akay, Alpaslan & Bargain, Olivier & Zimmermann, Klaus F., 2013. "Home Sweet Home? Macroeconomic Conditions in Home Countries and the Well-Being of Migrants," IZA Discussion Papers 7862, Institute for the Study of Labor (IZA).
  2. Biewen, Martin & Juhasz, Andos, 2013. "A Goodness-of-Fit Approach to Estimating Equivalence Scales," IZA Discussion Papers 7209, Institute for the Study of Labor (IZA).

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