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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. 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.
    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.
    3. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
    4. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
    5. Kilpatrick, Robert W, 1973. "The Income Elasticity of the Poverty Line," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 327-332, August.
    6. 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.
    7. Pollak, Robert A & Wachter, Michael L, 1975. "The Relevance of the Household Production Function and Its Implications for the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 255-277, April.
    8. 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.
    9. 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.
    10. John Muellbauer, 1974. "Inequality Measures, Prices and Household Composition," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 493-504.
    11. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    12. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
    13. Wansbeek, Tom & Kapteyn, Arie, 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.
    14. Theo Goedhart & Victor Halberstadt & Arie Kapteyn & Bernard van Praag, 1977. "The Poverty Line: Concept and Measurement," Journal of Human Resources, University of Wisconsin Press, vol. 12(4), pages 503-520.
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