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Income-(in)dependent equivalence scales and inequality measurement

Author

Listed:
  • Dudel Christian

    (9162 Max Planck Institute for Demographic Research, Konrad-Zuse-Str. 1, 18057 Rostock, Germany)

  • Garbuszus Jan Marvin
  • Ott Notburga
  • Werding Martin

    (9142 Ruhr-Universität Bochum, Faculty of Social Science, Bochum, Germany)

Abstract

Most equivalence scales that are applied in research on inequality do not depend on income, even though there is strong empirical evidence that equivalence scales are actually income-dependent. This paper explores the consistency of results derived from income-independent and income-dependent scales. We show that applying income-independent scales when income-dependent scales would be appropriate leads to violations of the transfer principle. Surprisingly, there are some exceptions, but these require unrealistic and strong assumptions. Thus, the use of income-dependent equivalence scales almost always leads to different assessments of inequality than the use of income-independent equivalence scales. Two examples illustrate our findings.

Suggested Citation

  • Dudel Christian & Garbuszus Jan Marvin & Ott Notburga & Werding Martin, 2021. "Income-(in)dependent equivalence scales and inequality measurement," German Economic Review, De Gruyter, vol. 22(2), pages 235-255, May.
    • Handle: RePEc:bpj:germec:v:22:y:2021:i:2:p:235-255:n:4
    DOI: 10.1515/ger-2020-0008
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    Citations

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    Cited by:

    1. Jan Marvin Garbuszus & Notburga Ott & Sebastian Pehle & Martin Werding, 2021. "Income-dependent equivalence scales: A fresh look at German micro-data," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(4), pages 855-873, December.
    2. Steven F. Koch, 2023. "Basic Needs (in)Security and Subjective Equivalence Scales," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 723-757, October.

    More about this item

    Keywords

    equivalence scales; income dependence; independence of base; inequality measurement;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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