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Income-Dependent Equivalence Scales and Choice Theory: Implications for Poverty Measurement

Discussion Papers 1991, 14 S.

Christos Koulovatianos, Carsten Schröder

2022

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Abstract

Equivalence Scales are a tool for removing the heterogeneity of household sizes in the measurement of inequality, and affect poverty assessments and poverty lines. We address the disadvantage that poor households may suffer due to their reduced ability to share goods within the household. This disadvantage is important to estimate and embed in standard analysis, as it seems to have a substantial quantitative impact on the measurement of poverty. We also suggest that future research on the role of subsistence incomes of different household types in utility functions may shed light on explanations for poverty and may guide anti-poverty policies.

Carsten Schröder

Board of Directors SOEP and Division Head Applied Panel Analysis in the German Socio-Economic Panel study Department



JEL-Classification: I32;D14;D63;D15
Keywords: Equivalent incomes, household-size economies, inequality, demographics and poverty, child costs, Generalized Equivalence Scale Exactness

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