IDEAS home Printed from https://ideas.repec.org/p/usi/wpaper/611.html
   My bibliography  Save this paper

Equivalence Scales Declining with Expenditure: Evidence and Implications for Income Distribution

Author

Listed:
  • Fabrizio Balli

    ()

  • Silvia Tiezzi

    ()

Abstract

We estimate expenditure dependent equivalence scales for Italian couples with and without children. Following Donaldson and Pendakur (2006) we incorporate the generalized absolute equivalence-scale exactness (GAESE) restrictions into a translated quadratic almost ideal (TQAI) demand system. We obtain declining with expenditure scales, a pattern that tends to strengthen when the number of children increases. This implies that scale economies in current consumption are lower for families with poor expenditure capacities. We also show that families living in the South and the Islands suffer a substantial additional cost to achieve, ceteris paribus, the same well-being of those living in the North. Finally, we find that ignoring the declining with expenditure pattern results in a relevant understatement of measured inequality.

Suggested Citation

  • Fabrizio Balli & Silvia Tiezzi, 2011. "Equivalence Scales Declining with Expenditure: Evidence and Implications for Income Distribution," Department of Economics University of Siena 611, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:611
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/quaderni/611.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Federico Perali & Martina Menon, 2009. "Econometric Identification of the Cost of Maintaining a Child," Working Papers 63/2009, University of Verona, Department of Economics.
    2. Koulovatianos, Christos & Schroder, Carsten & Schmidt, Ulrich, 2005. "On the income dependence of equivalence scales," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 967-996, June.
    3. J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
    4. Donaldson, David & Pendakur, Krishna, 2006. "The Identification of Fixed Costs From Consumer Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 255-265, July.
    5. Arthur Lewbel, 2003. "A rational rank four demand system," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 127-135.
    6. Douglas W. Allen, 2007. "The Effect on Divorce of Legislated Net-Wealth Transfers," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 580-597, October.
    7. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    8. Christos Koulovatianos & Carsten Schröder & Ulrich Schmidt, 2005. "Properties of Equivalence Scales in Different Countries," Journal of Economics, Springer, vol. 86(1), pages 19-27, October.
    9. Lewbel, Arthur, 2003. "Calculating compensation in cases of wrongful death," Journal of Econometrics, Elsevier, vol. 113(1), pages 115-128, March.
    10. Fabrizio Balli & Silvia Tiezzi, 2010. "Equivalence scales, the cost of children and household consumption patterns in Italy," Review of Economics of the Household, Springer, vol. 8(4), pages 527-549, December.
    11. Donaldson, David & Pendakur, Krishna, 2004. "Equivalent-expenditure functions and expenditure-dependent equivalence scales," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 175-208, January.
    12. Lewbel, Arthur, 1989. "Household equivalence scales and welfare comparisons," Journal of Public Economics, Elsevier, vol. 39(3), pages 377-391, August.
    13. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fabrizio Balli, 2012. "Are Traditional Equivalence Scales Still Useful? A Review and A Possible Answer," Department of Economics University of Siena 656, Department of Economics, University of Siena.

    More about this item

    Keywords

    Equivalent Expenditure Functions; Equivalence Scales;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usi:wpaper:611. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabrizio Becatti). General contact details of provider: http://edirc.repec.org/data/desieit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.