Assessing differences in household needs: A comparison of approaches for the estimation of equivalence scales using German expenditure data
Jan Marvin Garbuszus and
Julian Schmied ()
No 723, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen
Equivalence scales are routinely applied to adjust the income of households of different size and composition. Because of their practical importance for the measurement of inequality and poverty, a large number of methods for the estimation of equivalence scales have been proposed. Until now, no comprehensive comparison of these methods has been conducted. In this paper, we employ German household expenditure data to estimate exact equivalence scales using several parametric, semiparametric, and nonparametric approaches. Using a single dataset, we find that the resulting equivalence scales do not differ greatly by method; with the exception of some outliers that yield implausible scales. Most of the equivalence scales we estimate are close to the modified OECD scale. Calculating the Gini coefficient, we find that the at-risk-of-poverty rate and the interquartile range based on the more plausible equivalence scales lead to relatively consistent assessments of inequality and poverty. We conclude that differences in estimation methods for equivalence scales might be less important than was previously thought.
Keywords: Equivalence scales; household demand; inequality measurement; equivalence scale exactness; Engel curves; independence of base (search for similar items in EconPapers)
JEL-codes: C14 C21 C31 D12 I32 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Journal Article: Assessing differences in household needs: a comparison of approaches for the estimation of equivalence scales using German expenditure data (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:723
Access Statistics for this paper
More papers in Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().