Inequality of Well-Being and Isoelastic Equivalence Scales

Udo Ebert and Patrick Moyes ()

No V-333-11, Working Papers from University of Oldenburg, Department of Economics

Abstract: Equivalence scales are typically designed for adjusting households’ incomes for differences in size and composition. On the one hand, there is evidence that the way differences in needs across households are taken into account has a significant impact on the assessment of inequality in the society. On the other hand, equivalence scales with constant elasticity with respect to family size have been shown to provide a good approximation to a large variety of scales used in empirical work. We first show that, if one requires that the (multidimensional) inequality index 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. Assuming that all individuals have the same preferences and that households maximise the sum of their members’ utilities, we also prove that the only preferences consistent with isoelastic scales are of the Cobb-Douglas type.

Keywords: Inequality of Well-Being; Household Size; Equivalence Scales; Constant Elasticity; Cobb-Douglas Preferences (search for similar items in EconPapers)
JEL-codes: D31 D63 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-02, Revised 2011-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Oldenburg Working Papers V-333-11

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http://www.vwl.uni-oldenburg.de/download/V-333-11.pdf First version, 2011 (application/pdf)

Related works:
Working Paper: Inequality of well-being and isoelastic equivalence scales (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:old:dpaper:333

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