Equivalence Scales Based on Revealed Preference Consumption Expenditure Microdata - The Case of West Germany Zu Lüneburg

FFB Discussion Paper No. 3

57 Pages Posted: 12 Jun 2009

See all articles by Joachim Merz

Joachim Merz

Research Institute on Professions; Research Institute on Professions; Leuphana University of Lueneburg; Institute for the Study of Labor (IZA)

Jürgen Faik

Independent

Date Written: February 1994

Abstract

Equivalence scales are a prerequisite for any economic well-being comparison with measures on income distribution, inequality and poverty. This paper provides equivalence scales based on revealed preference consumption microdata for West Germany 1983. It is a part of a joint US and German research project comparing equivalence scales with consistent methods and similar microdata bases, recent income and consumption surveys of both countries. We concentrate on a single equation expenditure method with different Engel approaches as well as on a complete demand system approach.

The complete demand system approach provides true, constant utility based equivalence scales and is specified by an extended linear expenditure system (ELES). While the Engel methods traditionally focus on food expenditures, the multiple equation expenditure system takes into account a full market basket with all its interdependencies and relative prices.

Our equivalence scale study for West Germany based on actual available individual consumption expenditure data shows a variety of interesting results with regard to different goods and services baskets as well as to different household composition effects including the situation of the elderly, of the families with married couples and single mothers, and the cost of children. Our consumption results finally are compared to further consumption, expert, and subjective based equivalence scales.

Keywords: alternative equivalence scales, Germany, USA, distribution of income, inequality, poverty

JEL Classification: I30, I32, D30, D31

Suggested Citation

Merz, Joachim and Merz, Joachim and Faik, Jürgen, Equivalence Scales Based on Revealed Preference Consumption Expenditure Microdata - The Case of West Germany Zu Lüneburg (February 1994). FFB Discussion Paper No. 3, Available at SSRN: https://ssrn.com/abstract=1417320

Joachim Merz (Contact Author)

Research Institute on Professions ( email )

Lüneburg
Germany

Research Institute on Professions ( email )

Lüneburg
Germany

Leuphana University of Lueneburg

Scharnhorststrasse 1
Lüneburg, 21314
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Jürgen Faik

Independent ( email )

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