Inequality and isoelastic equivalence scales: restrictions and implications

Udo Ebert and Patrick Moyes ()

Social Choice and Welfare, 2017, vol. 48, issue 2, No 3, 295-326

Abstract: Abstract Comparisons of well-being across heterogenous households necessitate that households’ incomes are adjusted for differences in size and composition: equivalence scales are commonly used to achieve this objective. Equivalence scales with constant elasticity with respect to family size have been argued to provide a good approximation to a large variety of scales (see, e.g., Buhmann et al., Equivalence scales, well-being, inequality and poverty: sensitivity estimates across ten countries using the Luxembourg Income Study (LIS) database. Rev Income Wealth 34:115–142, 1988) and they therefore play a prominent role in empirical work. Focusing on inequality of well-being, we first show that, if one requires that the index of inequality is—in addition to standard properties—invariant to modifications of the relative (marginal) distributions of needs and income across households, then the equivalence scales must be isoelastic. In addition, if all households’ members have the same preferences and if households maximise the sum of their members’ utilities, then the only preferences consistent with isoelastic scales are of the Cobb–Douglas type.

Keywords: Utility Function; Household Income; Household Size; Equivalence Scale; Lorenz Curve (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00355-016-1004-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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: https://EconPapers.repec.org/RePEc:spr:sochwe:v:48:y:2017:i:2:d:10.1007_s00355-016-1004-x

Ordering information: This journal article can be ordered from
http://www.springer. ... c+theory/journal/355

DOI: 10.1007/s00355-016-1004-x

Access Statistics for this article

Social Choice and Welfare is currently edited by Bhaskar Dutta, Marc Fleurbaey, Elizabeth Maggie Penn and Clemens Puppe

More articles in Social Choice and Welfare from Springer, The Society for Social Choice and Welfare Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().