Economie et Statistique / Economics and Statistics n° 491-492 - 2017Age and generations
Calculating the standard of living of a household: one or several equivalence scales?
Equivalence scales, used to compare the standard of living of households of different size and composition, take into account the economies of scale resulting from pooling income and expenditure within households. Two approaches can be used to estimate these scales: an “objective” approach based on modelling household consumption expenditure, or a “subjective” approach based on how households perceive their standard of living. This article focuses on the latter. Using data from the 1995 to 2011 editions of the French Household Expenditure survey (Budget de famille) by Insee, estimations of equivalence scales highlight the sensitivity of results to the model specification, estimation coverage, the choice of subjective living standard indicators and the conventions used to calculate the cost of dependent children. The subjective approach does not give a robust identification of a single equivalence scale. It does, however, provide a set of possible equivalence scales; for instance, the adult equivalent for a child under 14 ranges from 0.15 to 0.8, while standard equivalence scales are based on a convention, such as 0.3 for the OECD-modified equivalence scale. Thus, for studies using these instruments, or for public policy, it may be preferable to consider a set of equivalence scales rather than just a single scale.
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Martin, H. (2017). Calculating the standard of living of a household: one or several equivalence scales? Economie et Statistique / Economics and Statistics, 491-492, 93-108. DOI: 10.24187/ecostat.2017.491d.1907