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Household Cost Functions And Equivalence Scales An Alternative Approach

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  • van Praag, B. M. S.

Abstract

In this paper we estimated household cost functions and equivalence scales. Two versions of scales are derived, a general one and a utilityspecific one. The new feature of this paper is the methodology. With respect to method we base ourselves on direct cost assessments by respondents for various welfare levels, derived from attitude questions. We see that respondents are not able to assess the true cost function directly, but that their response behavior reveals a virtual cost function. From their response the true cost function may be derived. The alternative approach used in this paper does not make use of typical consumer surveys. The specific question needed in this paper can be plugged into any type of survey, oral or written. Linked with a few background data on income and family size it serves its purpose. A straightforward generalization of 'this method lies at hand. The same method can be used to develop and estimate equivalence scales for other factors.

Suggested Citation

  • van Praag, B. M. S., 1984. "Household Cost Functions And Equivalence Scales An Alternative Approach," Econometric Institute Archives 272287, Erasmus University Rotterdam.
    • Handle: RePEc:ags:eureia:272287
    DOI: 10.22004/ag.econ.272287
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    References listed on IDEAS

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    1. 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.
    2. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
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    6. Reuben Gronau, 1974. "The Effect of Children on the Housewife's Value of Time," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 457-490, National Bureau of Economic Research, Inc.
    7. van Praag, Bernard & Goedhart, Theo & Kapteyn, Arie, 1980. "The Poverty Line-A Pilot Survey in Europe," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 461-465, August.
    8. Lazear, Edward P & Michael, Robert T, 1980. "Family Size and the Distribution of Real Per Capita Income," American Economic Review, American Economic Association, vol. 70(1), pages 91-107, March.
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    10. Tom Wansbeek & Arie Kapteyn, 1983. "Tackling Hard Questions by Means of Soft Methods: The Use of Individual Welfare Functions in Socio‐Economic Policy," Kyklos, Wiley Blackwell, vol. 36(2), pages 249-269, May.
    11. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
    12. John Muellbauer, 1974. "Inequality Measures, Prices and Household Composition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 493-504.
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    Cited by:

    1. Krishna Pendakur, 2018. "Welfare analysis when people are different," Canadian Journal of Economics, Canadian Economics Association, vol. 51(2), pages 321-360, May.

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