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Pensions for Singles and Couples

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  • Bruce Bradbury

Abstract

type="main"> Retirement policies often seek to set pensions at levels that enable single and married pensioners to have the same standard of living. The existing literature on consumer equivalence scales provides little assistance in reaching this policy objective, as the estimated scales are both imprecise and reliant upon strong and opaque assumptions. This paper proposes an alternative modeling strategy which has low data requirements and involves the use of detailed, but transparent, assumptions about the extent of joint consumption of particular commodities. These assumptions are embedded in an economic model of household consumption and combined with household expenditure data to calculate consumer equivalence scales. It is estimated that, in 2003–04, Australian couples of Age Pension age who owned their own home needed expenditures between 1.32 and 1.60 times that of a single person. These scales were lower than those used in the pension system.

Suggested Citation

  • Bruce Bradbury, 2014. "Pensions for Singles and Couples," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 480-498, September.
    • Handle: RePEc:bla:revinw:v:60:y:2014:i:3:p:480-498
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    File URL: http://hdl.handle.net/10.1111/roiw.12106
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    References listed on IDEAS

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    1. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
    2. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, 2013. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1267-1303.
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    5. James Banks & Paul Johnson, 1994. "Equivalence scales and public policy," Fiscal Studies, Institute for Fiscal Studies, vol. 15(1), pages 1-23, February.
    6. Timothy Smeeding & Gunther Schmaus & Brigitte Buhmann & Lee Rainwater, 1988. "Equivalence Scales, Well-Being, Inequality and Poverty: Sensitivity Estimates Across Ten Countries Using the LIS Database," LIS Working papers 17, LIS Cross-National Data Center in Luxembourg.
    7. Kapteyn, Arie & Wansbeek, Tom, 1985. "The individual welfare function : A review," Journal of Economic Psychology, Elsevier, vol. 6(4), pages 333-363, December.
    8. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    9. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-1096, December.
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    12. Bruce Bradbury, 2008. "Time And The Cost Of Children," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 305-323, September.
    13. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
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    Cited by:

    1. Bruce Bradbury, 2023. "Why we should increase Rent Assistance," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(2), pages 249-254, June.

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