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Two Scales, One Methodology - Expenditure Based Equivalence Scales for the United States and Germany

  • Merz, Joachim
  • Garner, Thesia
  • Smeeding, Timothy M.
  • Faik, Jürgen
  • Johnson, David

Choosing an appropriate equivalence scale is a prerequisite for comparisons of economic wellbeing income distribution, inequality or poverty. This is true for country specific work or for cross-national comparisons. Researchers generally either use a country specific equivalence scale (social assistance, expert based, or poverty scales), or adopt a single scale for all comparison across countries. Here we follow a different approach. We use microdata to estimate equivalence scales based on a revealed preference consumption approach for West Germany and the United States. We review several approaches and rely on a complete demand system approach, which provides constant utility based equivalence scales using an extended linear expenditure system (ELES). The multiple equation expenditure system takes into account a full market basket with all its interdependencies and relative prices. Our consumption-based equivalence results are compared to alternative consumption based measures, expert based measures, and subjective based measures in use in both countries and to other scales used for cross-national comparisons.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7233.

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Date of creation: Apr 1994
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Handle: RePEc:pra:mprapa:7233
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  1. Bojer, Hilde, 1977. "The effect on consumption of household size and composition," European Economic Review, Elsevier, vol. 9(2), pages 169-193.
  2. Arie Kapteyn & Peter Kooreman & Rob Willemse, 1988. "Some Methodological Issues in the Implementation of Subjective Poverty Definitions," Journal of Human Resources, University of Wisconsin Press, vol. 23(2), pages 222-242.
  3. 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.
  4. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
  5. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
  6. Singh, Balvir & Nagar, A L, 1973. "Determination of Consumer Unit Scales," Econometrica, Econometric Society, vol. 41(2), pages 347-55, March.
  7. Gronau, Reuben, 1988. "Consumption Technology and the Intrafamily Distribution of Resources:," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1183-1205, December.
  8. BLACKORBY, Charles & BOSSERT, Walter, 2004. "Interpersonal Comparisons of Well-Being," Cahiers de recherche 06-2004, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Bruce Bradbury, 1992. "Measuring the Cost of Children," Discussion Papers 0032, University of New South Wales, Social Policy Research Centre.
  10. de Vos, Klaas & Garner, Thesia I, 1991. "An Evaluation of Subjective Poverty Definitions: Comparing Results from the U.S. and the Netherlands," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 267-85, September.
  11. 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.
  12. van Praag, Bernard M S & Hagenaars, Aldi J M & van Weeren, Hans, 1982. "Poverty in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 28(3), pages 345-59, September.
  13. 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.
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