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The B.E. Journal of Economic Analysis & Policy

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Volume 13, Issue 2


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Declining Equivalence Scales and Cost of Children: Evidence and Implications for Inequality Measurement

Fabrizio Balli
  • Corresponding author
  • Department of Economics and Statistics, University of Siena, Piazza San Francesco 7, Siena 53100, Italy
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/ Silvia Tiezzi
Published Online: 2013-08-06 | DOI: https://doi.org/10.1515/bejeap-2013-0016


This article estimates expenditure-dependent equivalence scales for Italian couples with and without children. Following Donaldson and Pendakur (2006), the generalised absolute equivalence-scale exactness (GAESE) restrictions are incorporated into a translated quadratic almost ideal demand system. We obtain declining-with-expenditure equivalence scales, a pattern that tends to strengthen when the number of children increases. Thus, scale economies in current consumption are lower for families with poor expenditure capacities. We also show that families living in the South bear a substantial additional cost to achieve the same well-being of those living in the North. Finally, we find that ignoring the declining with expenditure pattern may involve a relevant understatement of measured inequality.

Keywords: equivalence scales; equivalent expenditure; cost of children; measured inequality

JEL classification: D12; D63


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About the article

Published Online: 2013-08-06

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 13, Issue 2, Pages 761–782, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2013-0016.

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