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Differences across countries and time in household expenditure patterns: implications for the estimation of equivalence scales

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  • Angela Daley
  • Thesia Garner
  • Shelley Phipps
  • Eva Sierminska
Abstract
When comparing economic well-being using income or expenditures, an equivalence scale is often used to adjust 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 twice as much due to the economies of scale in consumption. In this study, we ask whether it is appropriate to use a common equivalence scale when comparing economic well-being across countries and/or time if consumption expenditure patterns differ? Based on an Engel methodology, we estimate equivalence scales for a diverse set of countries (Canada, France, Israel, Poland, South Africa, Switzerland, Taiwan, United States) in different time periods (1999–2012). We find considerable differences in economies of scale across countries, as well as increases over time. Notably, we find that economies of scale are larger than those implied by the widely accepted ‘square root of household size’ equivalence scale. Our results indicate that using a common equivalence scale to compare economic well-being across countries and/or time is misleading. Specifically, if economies of scale are understated (as is the case when using the ‘square root of household size’), the relative poverty experienced by larger versus smaller families is being overstated.

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  • Angela Daley & Thesia Garner & Shelley Phipps & Eva Sierminska, 2020. "Differences across countries and time in household expenditure patterns: implications for the estimation of equivalence scales," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 734-757, November.
    • Handle: RePEc:taf:irapec:v:34:y:2020:i:6:p:734-757
    DOI: 10.1080/02692171.2020.1781798
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    Cited by:

    1. Martina Mysíková & Tomáš Želinský & Thesia I. Garner & Kamila Fialová, 2022. "Subjective equivalence scales in Eastern versus Western European countries," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 659-676, October.
    2. Steven F. Koch, 2023. "Basic Needs (in)Security and Subjective Equivalence Scales," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 723-757, October.
    3. Steven F. Koch, 2021. "Equivalence Scales with Endogeneity and Base Independence," Working Papers 202185, University of Pretoria, Department of Economics.
    4. Martina Mysíková & Tomáš Želinský & Michaela Jirková & Jiří Večerník, 2021. "Equivalence Scale and Income Poverty: Two Approaches to Estimate Country-specific Scale for the Czech Republic," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 156(1), pages 21-45, July.
    5. Steven F. Koch, 2022. "Equivalence scales in a developing country with extensive inequality," South African Journal of Economics, Economic Society of South Africa, vol. 90(4), pages 486-512, December.
    6. Dickson Thomas Ndamsa & Delphine Murkwi Gur & Francis Menjo Baye, 2023. "Household size and food consumption spending in cameroon. is there evidence of economies of size?," SN Business & Economics, Springer, vol. 3(8), pages 1-24, August.
    7. Md. Matiur Rahman & Seung-Hoon Jeon & Kyoung-Soo Yoon, 2020. "Estimation of Equivalence Scale and Assessment of Its Impact on Poverty Measurement in Bangladesh," Sustainability, MDPI, vol. 12(21), pages 1-13, October.
    8. Karina Doorley & Luke Duggan & Theano Kakoulidou & Barra Roantree, 2024. "Equivalisation (once again)," Trinity Economics Papers tep0124, Trinity College Dublin, Department of Economics.

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    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D1 - Microeconomics - - Household Behavior

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