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Declining Equivalence Scales and Cost of Children: Evidence and Implications for Inequality Measurement

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  • Balli Fabrizio
  • Tiezzi Silvia

    (Department of Economics and Statistics, University of Siena, Piazza San Francesco 7, Siena 53100, Italy)

Abstract

This article estimates expenditure-dependent equivalence scales for Italian couples with and without children. Following Donaldson and Pendakur (2006), the generalised absolute equivalence-scale exactness (GAESE) restrictions are incorporated into a translated quadratic almost ideal demand system. We obtain declining-with-expenditure equivalence scales, a pattern that tends to strengthen when the number of children increases. Thus, scale economies in current consumption are lower for families with poor expenditure capacities. We also show that families living in the South bear a substantial additional cost to achieve the same well-being of those living in the North. Finally, we find that ignoring the declining with expenditure pattern may involve a relevant understatement of measured inequality.

Suggested Citation

  • Balli Fabrizio & Tiezzi Silvia, 2013. "Declining Equivalence Scales and Cost of Children: Evidence and Implications for Inequality Measurement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 761-782, August.
    • Handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:761-782:n:18
    DOI: 10.1515/bejeap-2013-0016
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    References listed on IDEAS

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    1. Fabrizio Balli & Silvia Tiezzi, 2010. "Equivalence scales, the cost of children and household consumption patterns in Italy," Review of Economics of the Household, Springer, vol. 8(4), pages 527-549, December.
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    Cited by:

    1. Christian Dudel & Jan Marvin Garbuszus & Notburga Ott & Martin Werding, 2015. "Income Dependent Equivalence Scales, Inequality, and Poverty," CESifo Working Paper Series 5568, CESifo.

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