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Differences across Place and Time in Household Expenditure Patterns: Implications for the Estimation of Equivalence Scales

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  • DALEY Angela
  • GARNER Thesia
  • PHIPPS Shelley
  • SIERMINSKA Eva

Abstract

Equivalence scales are often used to adjust household income for differences in characteristics that affect needs. For example, a family of two is assumed to need more income than a single person, but not double due to economies of scale in consumption. However, in comparing economic well-being across countries and/or time, we ask whether it is appropriate to use the same equivalence scale if consumption expenditure patterns differ? We estimate equivalence scales for eight countries with data ranging from 1999 to 2012, using the same Engel approach in all cases. We find considerable variation in economies of scale across countries and some increases over time. Notably, we find that economies of scale are generally larger than those implied by the ‘square root of household size’ equivalence scale. Our results have important implications when deciding whether to use a common equivalence scale in comparisions of economic well-being across place and time.

Suggested Citation

  • DALEY Angela & GARNER Thesia & PHIPPS Shelley & SIERMINSKA Eva, 2020. "Differences across Place and Time in Household Expenditure Patterns: Implications for the Estimation of Equivalence Scales," LISER Working Paper Series 2020-06, Luxembourg Institute of Socio-Economic Research (LISER).
    • Handle: RePEc:irs:cepswp:2020-06
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    2. Steven F. Koch, 2022. "Equivalence scales in a developing country with extensive inequality," South African Journal of Economics, Economic Society of South Africa, vol. 90(4), pages 486-512, December.
    3. Dickson Thomas Ndamsa & Delphine Murkwi Gur & Francis Menjo Baye, 2023. "Household size and food consumption spending in cameroon. is there evidence of economies of size?," SN Business & Economics, Springer, vol. 3(8), pages 1-24, August.

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    More about this item

    Keywords

    economic well-being; Engel; necessities; equivalence scale; economies of scale;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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