Two Scales, One Methodology - Expenditure Based Equivalence Scales for the United States and Germany

Joachim Merz, Thesia Garner, Timothy M. Smeeding, Jürgen Faik () and David Johnson
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David Johnson: LEUPHANA University Lüneburg,Department of Economic, Behaviour and Law Sciences, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB))

No 8, FFB-Discussionpaper from Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg

Abstract: Choosing an appropriate equivalence scale is a prerequisite for comparisons of economic wellbeing income distribution, inequality or poverty. This is true for country specific work or for cross-national comparisons. Researchers generally either use a country specific equivalence scale (social assistance, expert based, or poverty scales), or adopt a single scale for all comparison across countries. Here we follow a different approach. We use microdata to estimate equivalence scales based on a revealed preference consumption approach for West Germany and the United States. We review several approaches and rely on a complete demand system approach, which provides constant utility based equivalence scales using an extended linear expenditure system (ELES). The multiple equation expenditure system takes into account a full market basket with all its interdependencies and relative prices. Our consumption-based equivalence results are compared to alternative consumption based measures, expert based measures, and subjective based measures in use in both countries and to other scales used for cross-national comparisons.

Keywords: alternative equivalence scale; Germany; USA; distribution of income; inequality; poverty (search for similar items in EconPapers)
JEL-codes: D30 D31 I30 I32 (search for similar items in EconPapers)
Pages: 50 pages
Date: 1994-04
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Citations: View citations in EconPapers (10)

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Working Paper: Two Scales, One Methodology - Expenditure Based Equivalence Scales for the United States and Germany (1994)
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