Basic Needs (In)Security and Subjective Equivalence Scales

Steven Koch

No 202259, Working Papers from University of Pretoria, Department of Economics

Abstract: Self-assessed insecurities in terms of clothing, housing and food - or basic needs - imply that at least some households are at lower levels of welfare than those that are meeting their needs. We use those self-assessments in an empirical exercise to determine the increase in total expenditure that would allow them to meet their needs, on average, and thus we are able to calculate the implied equivalence scales. We compare these subjective scales to ones that arise from objective measures, such as expenditure shares on the same items. Our subjective scales are more consistent and smaller across types of need, than those arising from expenditure shares. They are also more plausible, according to the criteria we develop. The resulting scales are smaller than any previously estimated for South Africa, implying that an additional child costs about 40 percent that of an adult and that household economies of scale are approximately 0.5, which is the scale economy assumed in the square-root scale.

Pages: 46 pages
Date: 2022-12
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Journal Article: Basic Needs (in)Security and Subjective Equivalence Scales (2023)
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