Chapter 13 The Construction and Estimation of Equivalence Scales and Their Uses

Abstract

Equivalence scales are deflators (or “scales”) by which the incomes of different household types can be converted to a comparable, needs-adjusted basis. They are measures of intra-household sharing potentials and differences in family members’ needs (i.e., of adults vs. children). One strand of literature uses econometric approaches to derive equivalence scales from household expenditure and time-use data. Another strand uses survey responses of people to quantify equivalence scales directly. Equivalence scales are potentially useful in several areas such as welfare-system design, income taxation, measurement of poverty and inequality, and determining lost earnings damages. This chapter surveys the literature on equivalence scales and presents some applications.

Citation

Schröder, C. (2009), "Chapter 13 The Construction and Estimation of Equivalence Scales and Their Uses", Slottje, D.J. (Ed.) Quantifying Consumer Preferences (Contributions to Economic Analysis, Vol. 288), Emerald Group Publishing Limited, Leeds, pp. 349-362. https://doi.org/10.1108/S0573-8555(2009)0000288016