Using Panel Data on Income Satisfaction to Estimate the Equivalence Scale Elasticity

19 Pages Posted: 23 Jan 2001

See all articles by Johannes Schwarze

Johannes Schwarze

University of Bamberg; German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Date Written: December 2000

Abstract

In this paper a new method to estimate the equivalence scale elasticity using individual panel data on income satisfaction will be developed. In contrast to other subjective approaches, the present one benefits from the fact that no direct cardinal individual welfare function has to be specified. In addition, panel data enables different scale use by the respondents to be controlled. The approach gives straightforward evidence: Obviously there is an optimal elasticity at which people feel satisfied with their income.

Keywords: Equivalence scales, income satisfaction, panel data

JEL Classification: C23, D31, I31

Suggested Citation

Schwarze, Johannes, Using Panel Data on Income Satisfaction to Estimate the Equivalence Scale Elasticity (December 2000). Available at SSRN: https://ssrn.com/abstract=252473

Johannes Schwarze (Contact Author)

University of Bamberg ( email )

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Bamberg 96045
Germany
+49 951 863 2600 (Phone)
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German Institute for Economic Research (DIW Berlin)

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Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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