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Equivalisation (once again)

Author

Listed:
  • Karina Doorley

    (Economic and Social Research Institute)

  • Luke Duggan

    (Economic and Social Research Institute)

  • Theano Kakoulidou

    (Economic and Social Research Institute)

  • Barra Roantree

    (Trinity College Dublin)

Abstract

Equivalisation is a crucial component of calculating statistics on income inequality and poverty, with these statistics sensitive to how incomes are equivalised. Ireland is among a number of countries to equivalise incomes using a country-specific equivalence scale, based (loosely) on the relativities of social welfare payments in the mid-1980s. We use three methods and data from three-decades of the Irish Household Budget Survey to investigate whether there is an empirical basis to support the use of the existing national scale over alternatives. We find that while estimates from the Engel method yield equivalence scales for additional adults that are not dissimilar to those used for the national equivalence scale, those from the Almost Ideal Demand System are much higher. Conversely, estimates from all three methods yield equivalence scales for children that are much smaller than those used for either the national or modified OECD equivalence scales. While the downward trend in income inequality (as measured by the Gini coefficient) does not appear to be sensitive to the choice of scale, rates of income poverty, particularly child poverty, are.

Suggested Citation

  • Karina Doorley & Luke Duggan & Theano Kakoulidou & Barra Roantree, 2024. "Equivalisation (once again)," Trinity Economics Papers tep0124, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0124
    as

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    File URL: https://www.tcd.ie/Economics/TEP/2024/TEP0124.pdf
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    References listed on IDEAS

    as
    1. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-890, July.
    2. 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.
    3. Conniffe, Denis & Keogh, Gary, 1988. "Equivalence Scales and Costs of Children," Research Series, Economic and Social Research Institute (ESRI), number GRS142.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, November.
    5. 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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inequality; poverty; equivalisation;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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