Estimating the cost of children through Engel curves by different good aggregates

Achille Vernizzi and Elena Siletti

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: Equivalence scales for the cost of children are estimated for one of the most developed Italian region (Lombardia) through the Engel approach. The data set is obtained from the survey on household consumption expenditures, which is hold by the Italian Central Institute for Statistics (ISTAT) in 1997, 1998, 1999 and 2000. The estimation of equivalence scales is not restricted to the share devoted to food. Besides the usual share of food and non-alcoholic beverages, we specify four further shares of necessities. Moreover the Box-Cox transformation for the dependent variable is adopted. The results, obtained in this research, show that, in estimating equivalence scales through Engel curves, it is very important to specify control variables that can take account for heterogeneity among families. Though the food share can still be a valid indicator to compare family welfare and then to estimate equivalence scales, in some situations it results to be misleading. The experiment of adopting broader good aggregates as indicators gives interesting results and more likely estimates in correspondence of some family typologies.

Keywords: Cost of children; Engel curves; Equivalence scales (search for similar items in EconPapers)
JEL-codes: D12 (search for similar items in EconPapers)
Date: 2004-12-31
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Citations: View citations in EconPapers (1)

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