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

MPRA Paper from University Library of Munich, Germany

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)
Date: 1994-04
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Citations: View citations in EconPapers (15)

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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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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7233

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