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Two can live as cheaply as one... but three's a crowd

  • Bollinger, Christopher R.
  • Nicoletti, Cheti
  • Pudney, Stephen

To measure poverty, incomes must be equivalized across households with different structures. In this paper, we use a very flexible ordered response model to analyze the relationship between income, demographic structure and subjective assessments of financial wellbeing drawn from the 1991-2008 British Household Panel Survey. Our results suggest the existence of large scale economies within marital/cohabiting couples, but substantial diseconomies from the addition of children or further adults. This pattern contrasts sharply with commonly-used equivalence scales, and is consistent with explanations in terms of the capital requirements associated with additions to the core couple.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2012-10.

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Date of creation: 29 May 2012
Date of revision:
Publication status: published
Handle: RePEc:ese:iserwp:2012-10
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  1. Gregori Baetschmann & Kevin E. Staub & Rainer Winkelmann, 2015. "Consistent estimation of the fixed effects ordered logit model," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 178(3), pages 685-703, 06.
  2. Martin Browning & Pierre-Andre Chiappori, 2006. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Economics Series Working Papers 289, University of Oxford, Department of Economics.
  3. Ravallion, Martin & Lokshin, Michael, 2000. "Identifying welfare effects from subjective questions," Policy Research Working Paper Series 2301, The World Bank.
  4. Pudney, Stephen, 2010. "Perception and retrospection: the dynamic consistency of responses to survey questions on wellbeing," ISER Working Paper Series 2010-07, Institute for Social and Economic Research.
  5. Heineck, Guido & Anger, Silke, 2010. "The returns to cognitive abilities and personality traits in Germany," Labour Economics, Elsevier, vol. 17(3), pages 535-546, June.
  6. Mathilde Almlund & Angela Lee Duckworth & James J. Heckman & Tim D. Kautz, 2011. "Personality Psychology and Economics," NBER Working Papers 16822, National Bureau of Economic Research, Inc.
  7. 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 115-42, June.
  8. Cobb-Clark, Deborah A. & Schurer, Stefanie, 2011. "The Stability of Big-Five Personality Traits," IZA Discussion Papers 5943, Institute for the Study of Labor (IZA).
  9. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  10. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
  11. Olivier Bargain & Olivier Donni, 2010. "The measurement of child costs : a Rothbarth-type method consistent with scale economies," Working Papers 201001, School of Economics, University College Dublin.
  12. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
  13. Muellbauer, John, 1979. "McClements on equivalence scales for children," Journal of Public Economics, Elsevier, vol. 12(2), pages 221-231, October.
  14. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, November.
  15. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  16. Paolo Figini, 1998. "Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition," Economics Technical Papers 988, Trinity College Dublin, Department of Economics.
  17. Dickens, Richard & Fry, Vanessa & Pashardes, Panos, 1993. "Non-linearities and Equivalence Scales," Economic Journal, Royal Economic Society, vol. 103(417), pages 359-68, March.
  18. Charlier, Erwin, 2002. "Equivalence Scales in an Intertemporal Setting with an Application to the Former West Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 99-126, March.
  19. Beegle, Kathleen & Himelein, Kristen & Ravallion, Martin, 2012. "Frame-of-reference bias in subjective welfare," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 556-570.
  20. Menno Pradhan & Martin Ravallion, 2000. "Measuring Poverty Using Qualitative Perceptions Of Consumption Adequacy," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 462-471, August.
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