IDEAS home Printed from https://ideas.repec.org/p/ags/uwarer/271306.html
   My bibliography  Save this paper

The estimation of pensioner equivalence scales using subjective data

Author

Listed:
  • Stewart, Mark B.

Abstract

This paper uses panel data on pensioners’ subjective evaluations of their financial positions to construct equivalence scales for pensioners. A pensioner couple is estimated to require an income 44% higher than a comparable single pensioner to reach the same standard of living. This is significantly less than the equivalence scale value implied by the ratio of state pension rates, the McClements equivalence scale value and the scale value derived from Engel curve estimation for food expenditure using the same data source. The estimated equivalence scale value is robust to variations in the definition of the pensioner sample, the measurement of income and the econometric model used.

Suggested Citation

  • Stewart, Mark B., 2009. "The estimation of pensioner equivalence scales using subjective data," Economic Research Papers 271306, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:271306
    DOI: 10.22004/ag.econ.271306
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/271306/files/twerp_893.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/271306/files/twerp_893.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.271306?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pollak, Robert A., 1991. "Welfare comparisons and situation comparisons," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 31-48, October.
    2. Angus Deaton & Christina Paxson, 1998. "Economies of Scale, Household Size, and the Demand for Food," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 897-930, October.
    3. 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.
    4. Atkinson, A. B. & Bourguignon, F., 1990. "The design of direct taxation and family benefits," Journal of Public Economics, Elsevier, vol. 41(1), pages 3-29, February.
    5. Mark B. Stewart, 1983. "On Least Squares Estimation when the Dependent Variable is Grouped," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 737-753.
    6. Gallant, A Ronald & Nychka, Douglas W, 1987. "Semi-nonparametric Maximum Likelihood Estimation," Econometrica, Econometric Society, vol. 55(2), pages 363-390, March.
    7. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
    8. McClements, L. D., 1979. "Muellbauer on equivalence scales," Journal of Public Economics, Elsevier, vol. 12(2), pages 233-242, October.
    9. Verbeek, Marno & Nijman, Theo, 1992. "Testing for Selectivity Bias in Panel Data Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 681-703, August.
    10. William Greene, 2004. "The behaviour of the maximum likelihood estimator of limited dependent variable models in the presence of fixed effects," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 98-119, June.
    11. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    12. Bellemare, C. & Melenberg, B. & van Soest, A.H.O., 2002. "Semi-parametric Models for Satisfaction with Income," Discussion Paper 2002-87, Tilburg University, Center for Economic Research.
    13. Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1434-1475, September.
    14. Muellbauer, John, 1979. "McClements on equivalence scales for children," Journal of Public Economics, Elsevier, vol. 12(2), pages 221-231, October.
    15. Ruud, Paul A., 1984. "Tests of Specification in Econometrics," Department of Economics, Working Paper Series qt4kq8m0hf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    16. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
    17. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    18. Johannes Schwarze, 2003. "Using Panel Data on Income Satisfaction to Estimate Equivalence Scale Elasticity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(3), pages 359-372, September.
    19. Charles Bellemare & Bertrand Melenberg & Arthur Soest, 2002. "Semi-parametric models for satisfaction with income," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 181-203, August.
    20. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
    21. Daniel T. Slesnick, 1998. "Empirical Approaches to the Measurement of Welfare," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2108-2165, December.
    22. Nijman, T.E. & Verbeek, M.J.C.M., 1992. "Testing for selectivity in panel data models," Other publications TiSEM 7ec34a6c-1d84-4052-971c-d, Tilburg University, School of Economics and Management.
    23. Erwin Charlier, 2002. "Equivalence Scales in an Intertemporal Setting with an Application to the Former West Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 99-126, March.
    24. Asghar Zaidi & Tania Burchardt, 2005. "Comparing Incomes When Needs Differ: Equivalization For The Extra Costs Of Disability In The U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(1), pages 89-114, March.
    25. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
    26. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
    27. Machin, Stephen J & Stewart, Mark B, 1990. "Unions and the Financial Performance of British Private Sector Establishments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 327-350, Oct.-Dec..
    28. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 471-493, July.
    29. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcello Morciano & Ruth Hancock & Stephen Pudney, 2015. "Disability Costs and Equivalence Scales in the Older Population in Great Britain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(3), pages 494-514, September.
    2. Aline Bütikofer & Michael Gerfin, 2017. "The economies of scale of living together and how they are shared: estimates based on a collective household model," Review of Economics of the Household, Springer, vol. 15(2), pages 433-453, June.
    3. Kanabar, Ricky, 2017. "In or out? Poverty dynamics among older individuals in the UK," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(4), pages 509-553, October.
    4. Pudney, Stephen & Hancock, Ruth & Morciano, Marcello, 2012. "Disability costs and equivalence scales in the older population," ISER Working Paper Series 2012-09, Institute for Social and Economic Research.
    5. Oznur Ozdamar & Eleftherios Giovanis, 2016. "The Link between Health Condition Costs and Standard of Living: A Structural Equation Modelling," Working Papers 1060, Economic Research Forum, revised 11 Jan 2016.
    6. Justin Ven & Nicolas Hérault & Francisco Azpitarte, 2017. "Identifying tax implicit equivalence scales," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(3), pages 257-275, September.
    7. Christian Dudel & Notburga Ott & Martin Werding, 2016. "Maintaining one’s living standard at old age: What does that mean?," Empirical Economics, Springer, vol. 51(3), pages 1261-1279, November.
    8. John Bishop & Andrew Grodner & Haiyong Liu & Ismael Ahamdanech-Zarco, 2014. "Subjective poverty equivalence scales for Euro Zone countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(2), pages 265-278, June.
    9. Justin van de Ven & Nicolas Herault & Francisco Azpitarte, 2014. "Identifying Tax Implicit Equivalence Scales," Melbourne Institute Working Paper Series wp2014n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. William H. Greene & David A. Hensher, 2008. "Modeling Ordered Choices: A Primer and Recent Developments," Working Papers 08-26, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Christian Dudel & Jan Marvin Garbuszus & Julian Schmied, 2021. "Assessing differences in household needs: a comparison of approaches for the estimation of equivalence scales using German expenditure data," Empirical Economics, Springer, vol. 60(4), pages 1629-1659, April.
    3. Bellemare, C. & Melenberg, B. & van Soest, A.H.O., 2002. "Semi-parametric Models for Satisfaction with Income," Discussion Paper 2002-87, Tilburg University, Center for Economic Research.
    4. Martin Biewen & Andos Juhasz, 2017. "Direct Estimation of Equivalence Scales and More Evidence on Independence of Base," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 875-905, October.
    5. Pudney, Stephen & Hancock, Ruth & Morciano, Marcello, 2012. "Disability costs and equivalence scales in the older population," ISER Working Paper Series 2012-09, Institute for Social and Economic Research.
    6. Lukas Schuelke & Luke Munford & Marcello Morciano, 2022. "Estimating the additional costs of living with a disability in the United Kingdom between 2013 and 2016," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(2), pages 313-327, March.
    7. Marcello Morciano & Ruth Hancock & Stephen Pudney, 2015. "Disability Costs and Equivalence Scales in the Older Population in Great Britain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(3), pages 494-514, September.
    8. Charles Bellemare & Bertrand Melenberg & Arthur van Soest van Soest, 2002. "Semi-parametric models for satisfaction with income," CeMMAP working papers 12/02, Institute for Fiscal Studies.
    9. BARGAIN Olivier & DONNI Olivier, 2010. "The Measurement of Child Costs: A Rothbarth-Type Method Consistent with Scale Economies and Parents’ Bargaining," LISER Working Paper Series 2010-30, Luxembourg Institute of Socio-Economic Research (LISER).
    10. Stanislaw Maciej Kot, 2023. "Equivalence scales for continuous distributions of expenditure," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(1), pages 185-218, March.
    11. Biewen, Martin & Juhasz, Andos, 2013. "A Goodness-of-Fit Approach to Estimating Equivalence Scales," IZA Discussion Papers 7209, Institute of Labor Economics (IZA).
    12. Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank.
    13. Christian Dudel & Notburga Ott & Martin Werding, 2016. "Maintaining one’s living standard at old age: What does that mean?," Empirical Economics, Springer, vol. 51(3), pages 1261-1279, November.
    14. Melenberg, B. & van Soest, A.H.O., 1995. "Semiparametric estimation of equivalence scales using subjective information," Discussion Paper 1995-71, Tilburg University, Center for Economic Research.
    15. Lionel WILNER, 2019. "The Dynamics of Individual Happiness," Working Papers 2019-18, Center for Research in Economics and Statistics.
    16. Bargain, Olivier B. & Donni, Olivier, 2009. "The Measurement of Child Costs: A Rothbarth-Type Method Consistent with Scale Economies," IZA Discussion Papers 4654, Institute of Labor Economics (IZA).
    17. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    18. 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.
    19. Ahlheim, Michael & Schneider, Friedrich, 2013. "Considering household size in Contingent Valuation studies," FZID Discussion Papers 68-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    20. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.

    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:uwarer:271306. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.