Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data

Melanie Borah, Andreas Knabe and Carina Kuhställer

No 6123, CESifo Working Paper Series from CESifo

Abstract: We estimate household equivalence scales using income satisfaction data from the German Socio-Economic Panel. We extend previous studies applying this approach by taking reference income into account. This allows separating needs-based from reference effects in the determination of income satisfaction. We show that this adjustment helps to overcome a bias causing an overestimation of adults’ and an underestimation of children’s needs-based equivalence weights. Our results indicate that controlling for income comparisons eliminates the gap between equivalence scale parameters for adults and children found in other studies.

Keywords: equivalence scale; income satisfaction; relative income (search for similar items in EconPapers)
JEL-codes: D31 I32 J13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data (2019)
Working Paper: Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6123

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