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Household Decisions and Equivalence Scales

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  • Udo Ebert

    ()
    (Institut für Volkswirtschaftslehre, Carl von Ossietzky Universität Oldenburg)

  • Patrick Moyes

    ()
    (CNRS, IDEP and GRAPE, Université Montesquieu Bordeaux IV)

Abstract

Considering an economy with two goods {a private good and a household good with a variable degree of publicness {and identical individuals, the paper investigates the implications for economies of size of two extreme households' decision rules: (i) the cooperative model, where households maximize the welfare of their members, and (ii) the non-cooperative model, where each household's member maximizes her own utility. Under the cooperative rule, publicness of the household good is necessary and sufficient for positive economies of size and for these to increase with family size. This no longer holds true under the non-cooperative rule where negative economies of size may appear even in the case where the household consumption good is purely public. The results suggest that it is the inefficiency of the non-cooperative rule that is at the origin of the problem. Furthermore comparison of the scale factors' values indicates that the cooperative rule leads to less generous scales than the non-cooperative one.

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Bibliographic Info

Paper provided by Institut d'economie publique (IDEP), Marseille, France in its series IDEP Working Papers with number 0404.

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Length: 28 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:iep:wpidep:0404

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Keywords: Equivalence scales; Household decision rule; Welfare maximization; Non-cooperative behaviour; Returns to size.;

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References

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  1. Christos Koulovatianos & Carsten Schröder & Ulrich Schmidt, 2005. "Properties of Equivalence Scales in Different Countries," Vienna Economics Papers 0503, University of Vienna, Department of Economics.
  2. Udo Ebert & Patrick Moyes, 2003. "Equivalence Scales Reconsidered," Econometrica, Econometric Society, vol. 71(1), pages 319-343, January.
  3. 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.
  4. Donaldson, David & Pendakur, Krishna, 2006. "The Identification of Fixed Costs From Consumer Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 255-265, July.
  5. Lanjouw, Peter & Ravallion, Martin & DEC, 1994. "Poverty and household size," Policy Research Working Paper Series 1332, The World Bank.
  6. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
  7. Bourguignon, F. & Chiappori, P-A., 1991. "Collective Models of Household Behaviour: An Introduction," DELTA Working Papers 91-29, DELTA (Ecole normale supérieure).
  8. Paolo Figini, 1998. "Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition," Economics Technical Papers 988, Trinity College Dublin, Department of Economics.
  9. 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.
  10. Jenkins, Stephen P & Lambert, Peter J, 1993. "Ranking Income Distributions When Needs Differ," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(4), pages 337-56, December.
  11. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
  12. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  13. Donaldson, David & Pendakur, Krishna, 2004. "Equivalent-expenditure functions and expenditure-dependent equivalence scales," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 175-208, January.
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Citations

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Cited by:
  1. Patrick MOYES (GREThA et IDEP Marseille), 2011. "Comparisons of Heterogeneous Distributions and Dominance Criteria," Cahiers du GREThA 2011-23, Groupe de Recherche en Economie Théorique et Appliquée.
  2. repec:old:wpaper:331 is not listed on IDEAS
  3. Udo Ebert & Patrick Moyes, 2011. "Inequality of Well-Being and Isoelastic Equivalence Scales," Working Papers V-333-11, University of Oldenburg, Department of Economics, revised Feb 2011.
  4. Udo Ebert, 2011. "The redistribution of income when needs differ," Working Papers V-331-11, University of Oldenburg, Department of Economics, revised Feb 2011.
  5. Patrick MOYES ( GREThA, CNRS, UMRS 5113) & Nicolas GRAVEL (AMSE (GREQAM) et Aix-Marseille University), 2011. "Utilitarianism or Welfarism: Does it Make a Difference?," Cahiers du GREThA 2011-30, Groupe de Recherche en Economie Théorique et Appliquée.
  6. repec:old:wpaper:333 is not listed on IDEAS
  7. Udo Ebert, 2013. "The relationship between individual and household measures of WTP and WTA," Social Choice and Welfare, Springer, vol. 40(2), pages 367-390, February.
  8. Lucia Mangiavacchi & Luca Piccoli, 2009. "Child welfare and intra-household inequality in Albania," Working Papers 149, ECINEQ, Society for the Study of Economic Inequality.
  9. Udo Ebert, 2010. "Dominance criteria for welfare comparisons: using equivalent income to describe differences in needs," Theory and Decision, Springer, vol. 69(1), pages 55-67, July.

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