Family-Type Subsistence Incomes

Abstract

Different family types may have a fixed flow of consumption costs related to subsistence needs. We use a survey approach in order to identify and estimate such a fixed component of spending for different families. Our method involves making direct questions about the linkup between aggregate disposable family income and well-being for different family types. Conducting a pilot version of our survey in six countries, Germany, France, Cyprus, China, India and Botswana, we provide evidence that fixed costs of consumption are embedded in welfare evaluations of respondents. More precisely, we find that the relationship between welfare-retaining aggregate family incomes across different family types suggested by Donaldson and Pendakur (2006) and termed Generalized Absolute Equivalence Scale Exactness is prevalent and robust in our data. We use this relationship to identify subsistence needs of different family types and discuss potential problems and extensions.

Keywords: subsistence, equivalence scales, survey method, generalized absolute equivalence scale exactness

JEL Classification: I31, I32, C42, D31, D12, D63