Estimating the Equivalent Scales by Means of the Extended Linear Expenditure System (ELES)

Joanna Ciecieląg

Ekonomia journal, 2002, vol. 7

Abstract: The problem of the child keeping cost is mostly associated with attempts at identifying the actual expenditures borne by the parents. However, a much more interesting problem is that about the income that the family needs in order to maintain the living standard from before the child's birth. The thus conceived child keeping cost definition is only indirectly related to the expenditures actually borne or the alternative cost of having a child. It rather is a measure of the family's prosperity: the amount by which the income must be compensated so as to make its utility level equal to that enjoyed by the family before the child's birth.

In the paper, the thus understood child keeping cost was estimated using the notion of equivalent scales constructed by means of the Extended Linear Expenditure System (ELES). The research was based on data drawn from the Central Statistical Office's study on Polish household budgets of 1998. The results obtained show clear differences in the estimations of the child keeping cost according to the level of the family's income: for the 25% of families with the highest income, the level of the childrelated costs to be borne to maintain the living standard on an unchanged level is decidedly lower than for the remaining households. Also, the child's age is not without importance: upon the child's reaching the school age (7-17 years), a substantial increase in costs takes place.

Date: 2002
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