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Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition

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  • Paolo Figini

Abstract

Total household income inequality can be very different from inequality measured at the income per-capita level but only in recent years has the patter of this divergence been investigated. In this paper, result form Coulter et al. (1992) using a one-parameter equivalence scale are updated using data for Ireland, Italy, the UK and the US. A class of two-parameter equivalence scales, representing relative weights of adults and children, is then analyzed. Results are shown to depend on the correlation between household size, household composition and household income. Inequality generally increases with childrens weight and decreases with adults weight. OECD and other two-parameter equivalence scales empirically used show a similarity of results to one-parameter equivalence scales with elasticity around 0.5.

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  • Paolo Figini, 1998. "Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition," LIS Working papers 185, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:185
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    1. Timothy Smeeding & Gunther Schmaus & Brigitte Buhmann & Lee Rainwater, 1988. "Equivalence Scales, Well-Being, Inequality and Poverty: Sensitivity Estimates Across Ten Countries Using the LIS Database," LIS Working papers 17, LIS Cross-National Data Center in Luxembourg.
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    2. Udo Ebert & Patrick Moyes, 2009. "Household decisions and equivalence scales," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(4), pages 1039-1062, October.
    3. Chritoph Birkel, 2005. "Einkommensungleichheit und Umverteilung in Westdeutschland, Großbritannien und Schweden, 1950-2000," LIS Working papers 425, LIS Cross-National Data Center in Luxembourg.
    4. Carol Graham & Stefano Pettinato, 2006. "Freustrated Achievers: Winners, Losers, and Subjective Well-Being in Peru’s Emerging Economy," The ANNALS of the American Academy of Political and Social Science, , vol. 606(1), pages 128-153, July.
    5. Patrick Moyes & Alain Trannoy, 1999. "Le quotient familial : une structure fiscale cohérente avec le critère de Lorenz relatif," Économie et Prévision, Programme National Persée, vol. 138(2), pages 111-124.
    6. Lars Osberg, 2003. "Long Run Trends in Income Inequality in the United States, UK, Sweden, Germany and Canada: A Birth Cohort View," Eastern Economic Journal, Eastern Economic Association, vol. 29(1), pages 121-141, Winter.
    7. Caminada, Koen & Goudswaard, Kees, 1999. "Social policy and income distribution: An empirical analysis for the Netherlands," MPRA Paper 20183, University Library of Munich, Germany.
    8. Koen Caminada & Kees Goudswaard, 2001. "International Trends in Income Inequality and Social Policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 395-415, August.
    9. Stefan Kranzinger, 2020. "The decomposition of income inequality in the EU-28," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 643-668, August.
    10. Koen Caminada & Chen Wang, 2011. "Disentangling Income Inequality and the Redistributive Effect of Social Transfers and Taxes in 36 LIS Countries," LIS Working papers 567, LIS Cross-National Data Center in Luxembourg.
    11. R. Bollinger, Christopher & Nicoletti, Cheti & Pudney, Stephen, 2012. "Two can live as cheaply as one… but three’s a crowd," ISER Working Paper Series 2012-10, Institute for Social and Economic Research.
    12. Jesper Drescher, 1999. "Income Inequality Decomposition by Income Source and by Population Subgroups: A Theoretical Overview and the Empirical Case of Denmark," LIS Working papers 209, LIS Cross-National Data Center in Luxembourg.
    13. Lars Osberg & Kuan Xu, 1999. "Poverty Intensity: How Well Do Canadian Provinces Compare?," Canadian Public Policy, University of Toronto Press, vol. 25(2), pages 179-195, June.
    14. Gnawali, Devendra Prasad & Pokhrel, Subhash & Sié, Ali & Sanon, Mamadou & De Allegri, Manuela & Souares, Aurélia & Dong, Hengjin & Sauerborn, Rainer, 2009. "The effect of community-based health insurance on the utilization of modern health care services: Evidence from Burkina Faso," Health Policy, Elsevier, vol. 90(2-3), pages 214-222, May.
    15. Lars Osberg & Kuan Xu, 2008. "How Should We Measure Poverty in a Changing World? Methodological Issues and Chinese Case Study," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 419-441, May.
    16. Udo Ebert & Patrick Moyes, 2000. "Adjusting Incomes for Needs: Can One Avoid Equivalence Scales?," Econometric Society World Congress 2000 Contributed Papers 0917, Econometric Society.
    17. Koen Caminada & Kees Goudswaard & Chen Wang & Jinxian Wang, 2019. "Income Inequality and Fiscal Redistribution in 31 Countries After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 119-148, March.
    18. Yin Zhang & Guanghua Wan, 2006. "Poverty Reduction in China: Trends and Causes," WIDER Working Paper Series RP2006-152, World Institute for Development Economic Research (UNU-WIDER).
    19. Osberg, Lars, 2002. "Trends in poverty: the UK in international perspective: how rates mislead and intensity matters," ISER Working Paper Series 2002-10, Institute for Social and Economic Research.
    20. Clemens Tesch-Römer & Andreas Motel-Klingebiel & Martin Tomasik, 2008. "Gender Differences in Subjective Well-Being: Comparing Societies with Respect to Gender Equality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 85(2), pages 329-349, January.
    21. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November.
    22. Figini, P, 1999. "Inequality and Growth Revisited," Trinity Economics Papers 992, Trinity College Dublin, Department of Economics.
    23. Christoph Birkel, 2006. "Einkommensungleichheit und Umverteilung in Westdeutschland, Großbritannien und Schweden 1950 bis 2000," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(1), pages 174-194.
    24. Udo Ebert & Patrick Moyes, 2017. "Inequality and isoelastic equivalence scales: restrictions and implications," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(2), pages 295-326, February.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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