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Equivalence scales and consumption inequality: a study of household consumption patterns in italy

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  • Claudio Michelini

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    Abstract

    This paper utilises unit record survey data on expenditures and incomes of Italianhouseholds of different demographic profiles to estimate consumption equivalence scales whichmeasure the relative levels of spending required by households of different composition to attain givenlevels of utility. The equivalence scales have been obtained from the parameters of a few alternativeversions of a rank 3 complete demand system with demand shifters. Among the demographic variablesincluded in the models, the type of housing tenure and the age of children have special relevance. We have also computed the expenditure elasticities for the most common types of households and analysed how deflating expenditure with the equivalence scales affects consumption inequality amonghouseholds. The analysis is developed within the framework of hypothesised utility maximising behaviour of households.

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    File URL: http://wp.demm.unimi.it/tl_files/wp/1999/DEMM-1999_002wp.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 1999-02.

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    Date of creation: 01 Jan 1999
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    Handle: RePEc:mil:wpdepa:1999-02

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    Keywords: Equivalence scales; Rank 3 demand systems; Income inequality.;

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    1. Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 525-43, October.
    2. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
    3. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-30, May.
    4. Michelini, Claudio, 1999. "The estimation of a rank 3 demand system with demographic demand shifters from quasi-unit record data of household consumption," Economics Letters, Elsevier, vol. 65(1), pages 17-24, October.
    5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
    6. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
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