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Taking prices seriously in the measurement of inequality

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Listed author(s):
  • Pendakur, Krishna

Abstract

In the measurement of inequality, adjustments for differences across households in their demographic composition and in the price regimes they face are usually very simple. Often, nominal income is adjusted with an income-independent price deflator and a price-independent equivalence scale. I show that using more flexible income-dependent price deflators and price-dependent equivalence scales affects the level of, and trend in, measured consumption inequality in Canada over 1978-1996. Whereas standard methods show a large increase in inequality over the eraly 1980s and a decrease over the mid 1990s, more flexible methods show a smaller increase over the early 1980s and no decrease over the mid 1990s.

(This abstract was borrowed from another version of this item.)

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 86 (2002)
Issue (Month): 1 (October)
Pages: 47-69

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Handle: RePEc:eee:pubeco:v:86:y:2002:i:1:p:47-69
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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Find related papers by JEL classification:
  • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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  1. Donaldson, D. & Pendakur, K., 1999. "Equivalent-Income Functions and Income-Dependent Equivalence Scales," Discussion Papers dp99-8, Department of Economics, Simon Fraser University.
  2. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
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  6. Apps, Patricia & Savage, Elizabeth, 1989. "Labour supply, welfare rankings and the measurement of inequality," Journal of Public Economics, Elsevier, vol. 39(3), pages 335-364, August.
  7. Barrett, Garry F & Crossley, Thomas F & Worswick, Christopher, 2000. "Consumption and Income Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 76(233), pages 116-138, June.
  8. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Equivalence Scales and Expenditure Inequality on Unit Record Household Budget Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 455-482, December.
  9. Idson, Todd & Miller, Cynthia, 1999. "Calculating a Price Index for Families with Children: Implications for Measuring Trends in Child Poverty Rates," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(2), pages 217-233, June.
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  11. Pendakur, Krishna, 1998. "Semiparametric estimates and tests of base-independent equivalence scales," Journal of Econometrics, Elsevier, vol. 88(1), pages 1-40, November.
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  13. Pashardes, Panos, 1995. "Equivalence scales in a rank-3 demand system," Journal of Public Economics, Elsevier, vol. 58(1), pages 143-158, September.
  14. Gouveia, Miguel & Tavares, Jose, 1995. "The Distribution of Household Income and Expenditure in Portugal: 1980 and 1990," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(1), pages 1-17, March.
  15. Shelley A. Phipps, 1993. "Measuring Poverty among Canadian Households: Sensitivity to Choice of Measure and Scale," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 162-184.
  16. Donaldson, David, 1992. "On The Aggregation Of Money Measures Of Well-Being In Applied Welfare Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
  17. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
  18. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
  19. King, Mervyn A., 1983. "Welfare analysis of tax reforms using household data," Journal of Public Economics, Elsevier, vol. 21(2), pages 183-214, July.
  20. Daniel T. Slesnick, 1998. "Empirical Approaches to the Measurement of Welfare," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2108-2165, December.
  21. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
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