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Equivalence Scales Based on Revealed Preference Consumption Expenditure Microdata - The Case of West Germany

  • Merz, Joachim
  • Faik, Jürgen

Equivalence scales are a prerequisite for any economic well-being comparison with measures on income distribution, inequality and poverty. This paper provides equivalence scales based on revealed preference consumption microdata for West Germany 1983. It is a part of a joint US and German research project comparing equivalence scales with consistent methods and similar microdata bases, recent income and consumption surveys of both countries. We concentrate on a single equation expenditure method with different Engel approaches as well as on a complete demand system approach. The complete demand system approach provides true, constant utility based equivalence scales and is specified by an extended linear expenditure system (ELES). While the Engel methods traditionally focus on food expenditures, the multiple equation expenditure system takes into account a full market basket with all its interdependencies and relative prices. Our equivalence scale study for West Germany based on actual available individual consumption expenditure data shows a variety of interesting results with regard to different goods and services baskets as well as to different household composition effects including the situation of the elderly, of the families with married couples and single mothers, and the cost of children. Our consumption results finally are compared to further consumption, expert, and subjective based equivalence scales.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16297.

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Date of creation: Feb 1994
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Handle: RePEc:pra:mprapa:16297
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  1. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
  2. Kakwani, Nanak C, 1977. "On the Estimation of Consumer Unit Scales," The Review of Economics and Statistics, MIT Press, vol. 59(4), pages 507-10, November.
  3. Bojer, Hilde, 1977. "The effect on consumption of household size and composition," European Economic Review, Elsevier, vol. 9(2), pages 169-193.
  4. Singh, Balvir & Nagar, A L, 1973. "Determination of Consumer Unit Scales," Econometrica, Econometric Society, vol. 41(2), pages 347-55, March.
  5. Kapteyn, A.J. & Kooreman, P. & Willemse, R., 1987. "Some methodological issues in the implementation of subjective poverty definitions," Research Memorandum FEW 245, Tilburg University, School of Economics and Management.
  6. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
  7. Muellbauer, John, 1977. "Testing the Barten Model of Household Composition Effects and the Cost of Children," Economic Journal, Royal Economic Society, vol. 87(347), pages 460-87, September.
  8. Tsakloglou, Panos, 1991. "Estimation and Comparison of Two Simple Models of Equivalence Scales for the Cost of Children," Economic Journal, Royal Economic Society, vol. 101(405), pages 343-57, March.
  9. Bradbury, Bruce, 1994. "Measuring the Cost of Children," Australian Economic Papers, Wiley Blackwell, vol. 33(62), pages 120-38, June.
  10. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September.
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