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Identifiability of Household Equivalence Scales through Exact Aggregation: Some Empirical Results

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  • Christopher J. Nicol

Abstract

General and commodity-specific equivalence scales are estimated with Canadian microdata. The former are identifiable when exact aggregation is imposed. However, these identifiability restrictions can be tested, as can homogeneity and symmetry in the model employed here. Exact aggregation is not rejected but homogeneity and symmetry are. The estimated equivalence scales exhibit increasing returns to scale in family size. They also rise with age, exhibit strong regional effects, and rural households' scales are generally lower than those of urban households. Since scales are sensitive to imposing homogeneity and symmetry restrictions, caution should be exercised in using such equivalence scales for policy purposes.

Suggested Citation

  • Christopher J. Nicol, 1994. "Identifiability of Household Equivalence Scales through Exact Aggregation: Some Empirical Results," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 307-328, May.
    • Handle: RePEc:cje:issued:v:27:y:1994:i:2:p:307-28
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    Cited by:

    1. Griffiths, W.E. & Valenzuela, R., 2001. "Estimating Costs of Children from Micro-Unit Records: A New Procedure Applied to Australian Data," Department of Economics - Working Papers Series 795, The University of Melbourne.
    2. Pendakur, Krishna, 1998. "Semiparametric estimates and tests of base-independent equivalence scales," Journal of Econometrics, Elsevier, vol. 88(1), pages 1-40, November.
    3. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2004. "Simultaneous estimation of an implicit directly additive demand system and the distribution of expenditure--an application of maximum entropy," Economic Modelling, Elsevier, vol. 21(2), pages 361-385, March.
    4. Toshinobu Matsuda, 2005. "Differential Demand Systems: A Further Look at Barten's Synthesis," Southern Economic Journal, John Wiley & Sons, vol. 71(3), pages 607-619, January.

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