De gustibus non est disputandum? A new approach to the estimation of equivalence scales

Mauro Maltagliati () and Gustavo Santis ()
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Mauro Maltagliati: Department of Statistics “G. Parenti”
Gustavo Santis: Un. of Messina

Statistical Methods & Applications, 2001, vol. 10, issue 1, No 16, 236 pages

Abstract: Abstract We argue that when the household composition changes, consumption patterns vary not only because of the cost effect that equivalence scales try to measure, but also because of a “taste” or “style” effect. This effect can be identified and measured, under a few assumptions, with the use of a new methodology, calledDM 2 (Decomposition Model of the effects of Demographic Metamorphosis), that can be viewed as a generalisation of Ray's (1983) price-scaling approach to the construction of equivalent scales. An empirical application to data drawn from the Istat 1995 Italian Household Budget Survey suggests that the proposed method improves our understanding of households' consumption patterns and the reliability of the equivalence scales that we derive.

Keywords: Equivalence scales; complete demand systems; utility comparison; taste; lifestyle (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1007/BF02511649

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