Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data

Andreas Knabe, Melanie Borah and Carina Kuhställer

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: We estimate household equivalence scales using income satisfaction data from the German Socio-Economic Panel. We extend previous studies applying this approach by taking reference income into account. This allows separating needs-based from reference effects in the determination of income satisfaction. We show that this adjustment helps to overcome a bias causing an overestimation of adults’ and an underestimation of children’s equivalence weights. Our results indicate that controlling for income comparisons completely eliminates the gap between equivalence scale parameters for adults and children found in other studies. Furthermore, the equivalence weight of children appears to be decreasing in household income.

JEL-codes: D31 I32 J13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data (2019)
Working Paper: Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145545

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