A Restatement of Equivalence Scales Using Time and Monetary Expenditures Combined with Individual Prices

François Gardes and Christophe Starzec

Review of Income and Wealth, 2018, vol. 64, issue 4, 961-979

Abstract: In the classic equivalence scale estimations based on micro‐econometric analysis, only the costs of market consumption are taken into account. We define the concept of full cost equivalence scales as integrating both monetary and the time use costs and measure it on matched French family budget and time use surveys. These data allow us to define full prices and to estimate equivalence scales conditional to possible substitution through prices. The results show higher full scales than the monetary for the preferred Independent of a Base specification. Relative to the cost of the second adult, the full child cost is also larger than the monetary for matching estimators and the Prais‐Houthakker model. It shows households' capacity to substitute domestic production to market activities. In consequence the measures of income inequality diminish considerably using full income and full equivalence scales.

Date: 2018
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