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Subjective poverty equivalence scales for Euro Zone countries

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  • Ismael Ahamdanech-Zarco

    (Department of Economics, East Carolina University)

  • John A. Bishop

    ()
    (Department of Economics, East Carolina University)

  • Andrew Grodner

    (Department of Economics, East Carolina University)

  • Haiyong Liu

    (Department of Economics, East Carolina University)

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    Abstract

    While the idea behind subjective equivalence scales is generally attractive, subjective scales have been plagued by problems of inconsistency. We address this problem with new European Income and Living Conditions (SILC) datasets that are much larger in size than those available to previous researchers. We estimate subjective equivalence scales for the whole Euro Zone as well as its individual constituent countries. Our subjective scales increase consistently with household size. More importantly, we find that adding the first child is more costly than adding a third adult and that the marginal cost of children declines. Comparing modified OECD scale poverty rates to our subjective poverty rates (holding the overall poverty rate constant) we find that the subjective scales ‘redistribute poverty’ away from larger to smaller households.

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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2011-233.pdf
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    Bibliographic Info

    Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 233.

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    Length: 20 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:inq:inqwps:ecineq2011-233

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    Web page: http://www.ecineq.org
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    Related research

    Keywords: poverty; equivalence scales; subjective method; eurozone.;

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    References

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    1. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, Elsevier, vol. 2(3), pages 337-369.
    2. Olken, Benjamin A., 2005. "Revealed community equivalence scales," Journal of Public Economics, Elsevier, Elsevier, vol. 89(2-3), pages 545-566, February.
    3. Thesia I. Garner & Kathleen Short, 2005. "Personal Assessments of Minimum Income and Expenses: What Do They Tell Us about 'Minimum Living' Thresholds and Equivalence Scales?," Working Papers, U.S. Bureau of Labor Statistics 379, U.S. Bureau of Labor Statistics.
    4. Federico Perali & Martina Menon, 2009. "Econometric Identification of the Cost of Maintaining a Child," Working Papers, University of Verona, Department of Economics 63/2009, University of Verona, Department of Economics.
    5. van Praag, Bernard M S & Hagenaars, Aldi J M & van Weeren, Hans, 1982. "Poverty in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 28(3), pages 345-59, September.
    6. de Vos, Klaas & Zaidi, M Asghar, 1997. "Equivalence Scale Sensitivity of Poverty Statistics for the Member States of the European Community," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(3), pages 319-33, September.
    7. John A. Bishop & Feijun Luo & Xi Pan, 2006. "Economic Transition And Subjective Poverty In Urban China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(4), pages 625-641, December.
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