Differences across Place and Time in Household Expenditure Patterns: Implications for the Estimation of Equivalence Scales

Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2020-06

36 Pages Posted: 1 Jul 2020

See all articles by Angela Daley

Angela Daley

University of Maine

Thesia I. Garner

Bureau of Labor Statistics

Shelley Phipps

Dalhousie University - Department of Economics

Eva Sierminska

LISER; DIW Berlin - German Socio-Economic Panel Study (SOEP); IZA Institute of Labor Economics

Date Written: June 2, 2020

Abstract

Equivalence scales are often used to adjust household income for differences in characteristics that affect needs. For example, a family of two is assumed to need more income than a single person, but not double due to economies of scale in consumption. However, in comparing economic well-being across countries and/or time, we ask whether it is appropriate to use the same equivalence scale if consumption expenditure patterns differ? We estimate equivalence scales for eight countries with data ranging from 1999 to 2012, using the same Engel approach in all cases. We find considerable variation in economies of scale across countries and some increases over time. Notably, we find that economies of scale are generally larger than those implied by the ‘square root of household size’ equivalence scale. Our results have important implications when deciding whether to use a common equivalence scale in comparisions of economic well-being across place and time.

Keywords: economic well-being, Engel, necessities, equivalence scale, economies of scale

JEL Classification: D12, I31

Suggested Citation

Daley, Angela and Garner, Thesia I. and Phipps, Shelley and Sierminska, Eva, Differences across Place and Time in Household Expenditure Patterns: Implications for the Estimation of Equivalence Scales (June 2, 2020). Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2020-06, Available at SSRN: https://ssrn.com/abstract=3622246 or http://dx.doi.org/10.2139/ssrn.3622246

Angela Daley (Contact Author)

University of Maine ( email )

Orono, Maine 04469
United States

Thesia I. Garner

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Washington, DC 20212
United States

Shelley Phipps

Dalhousie University - Department of Economics ( email )

Halifax, Nova Scotia B3H 3J5
Canada

Eva Sierminska

LISER ( email )

3, avenue de la Fonte
Esch-sur-Alzette, L-4364
Luxembourg

HOME PAGE: http://www.sierminska.eu

DIW Berlin - German Socio-Economic Panel Study (SOEP)

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics ( email )

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

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