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Equivalence scales reconsidered: an empirical investigation

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  • Bönke, Timm
  • Schröder, Carsten

Abstract

Income-expenditure surveys typically provide incomes on the household level. As households can differ in size and needs, a reliable assessment of inequality in living standards, therefore, necessitates the conversion of the original heterogeneous into an artificial quasi-homogeneous population. Ebert and Moyes (2003) and Shorrocks (2004) theoretically explore the properties of two alternative conversion strategies: a weighting of household equivalent incomes by size and by needs. We use data from the Luxembourg Income Study for examining the sensitivity of the Gini and the Theil index to the chosen conversion strategy, and explain our results by means of an inequality decomposition by population subgroups.

Suggested Citation

  • Bönke, Timm & Schröder, Carsten, 2007. "Equivalence scales reconsidered: an empirical investigation," Economics Working Papers 2007-31, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:6876
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    References listed on IDEAS

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    1. 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.
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    3. Lambert, Peter J & Aronson, J Richard, 1993. "Inequality Decomposition Analysis and the Gini Coefficient Revisited," Economic Journal, Royal Economic Society, vol. 103(420), pages 1221-1227, September.
    4. Udo Ebert & Patrick Moyes, 2003. "Equivalence Scales Reconsidered," Econometrica, Econometric Society, vol. 71(1), pages 319-343, January.
    5. Jean‐Yves Duclos & Paul Makdissi, 2005. "Sequential Stochastic Dominance And The Robustness Of Poverty Orderings," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(1), pages 63-87, March.
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    7. Podder, Nripesh & Chatterjee, Srikanta, 2002. "Sharing the national cake in post reform New Zealand: income inequality trends in terms of income sources," Journal of Public Economics, Elsevier, vol. 86(1), pages 1-27, October.
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    9. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-1082, September.
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    More about this item

    Keywords

    income distribution; inequality; inequality decomposition; equivalence scale;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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