Equivalence scales reconsidered – an empirical investigation

Timm Bönke () and Carsten Schröder ()

No 102, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Households can differ in size and needs. A reliable assessment of inequality in living standards, therefore, necessitates the conversion of the original heterogeneous into an artificial quasi-homogeneous population. Ebert and Moyes (2003) and Shorrocks (2004) theoretically explore the properties of two conversion strategies, i.e., to calculate household equivalent incomes and then to weight household units by their size vs. their needs. We use data from the Luxembourg Income Study for examining the sensitivity of the Gini and the Theil index to the chosen conversion strategy, and explain our results by means of an inequality decomposition by household types. Country inequality rankings are sensitive to the conversion strategy applied. The decomposition analysis reveals the underlying mechanisms. We find inequality estimates typically to be lower in the size-weighted distribution compared to needs-weighting. This is driven by relatively higher weights of large household units in case of size weighting in combination with inequality being typically below average among households with children.

Keywords: income distribution; inequality; inequality decomposition; equivalence scale. (search for similar items in EconPapers)
JEL-codes: D31 D63 I32 (search for similar items in EconPapers)
Date: Written

Downloads: (external link)
http://www.ecineq.org/milano/WP/ECINEQ2008-102.pdf (application/pdf)

Related works:
Working Paper: Equivalence scales reconsidered an empirical investigation (2007)
Working Paper: Equivalence scales reconsidered ? an empirical investigation (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2008-102

Access Statistics for this paper

More papers in Working Papers from ECINEQ, Society for the Study of Economic Inequality
Contact information at EDIRC.
Series data maintained by Maria Ana Lugo ().