Abstract
A basic dilemma underlying the vast literature on the measurement of inequality is that, conceptually, we are concerned about inequality among individuals but empirically, we measure the inequality of the distribution of household income and consumption.
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Notes
- 1.
Throughout this chapter, whenever we refer to the word “household”, we mean it in this sense; otherwise, we qualify it with “single-person”.
- 2.
See in particular Haddad and Kanbur (1990), who provide a thorough analysis of the statistical aspects of this issue.
- 3.
- 4.
See for example Gronau and Hammermesh (2006).
- 5.
- 6.
This suggests giving the label “mercantilist” to the traditional approach to inequality measurement, which, however, is unlikely to be very much appreciated.
- 7.
The sum of the values of the products of market wage rates and total time endowments.
- 8.
In a model without household production, the idea that households may face different prices for the composite consumption commodity can be handled simply by defining their real wage rates as the ratio of the nominal wage rate to the consumption good price they face. In empirical studies it is usually, unrealistically, assumed that consumers always face the same market prices. In the present context, however, non-parental child care is a good example of a good whose cost varies, ranging from the opportunity cost of a grandmother’s time, through the fees for a pre-school playgroup or creche, to the wage of a highly trained nanny. These differences may not reflect simply differences in quality, but rather random differences in availability.
- 9.
We assume that all of the child’s time is spent as leisure. This utility function could be that imputed to the child by its parents.
- 10.
This, rather than the individual utility functions defined only on own consumptions, expresses the love, care and concern that household members may have for each other.
- 11.
- 12.
To see this, give 1 and 2 the same utility values in each household, and note that u k can be higher in h =1 if and only if \( {V^1} > {V^2}. \)
- 13.
See Apps and Rees (2009), Chap. 3 for an explicit analysis of the effects of productivity variations across households.
- 14.
Note also that we assume for simplicity that q h has no distributional effects within the household.
- 15.
In the light of the analysis in the next subsection, it is clear that here we have assumed that the distributional term \( {{{{{{(\partial {l_{ih}}}} \left/ {\partial } \right.}{s_{ih}})}} \left/ {{{{{\partial {s_{ih}}}} \left/ {{\partial {q_h}}} \right.}}} \right.}) \) is small enough to be ignored. Note that the derivatives \( {{{\partial {s_{ih}}}} \left/ {{\partial {q_h}}} \right.} \), i = 1, 2, k must sum to 0, since full income is unaffected by a change in q h .
- 16.
We can, in the usual way, use a Slutsky equation to decompose this into income and substitution effects.
- 17.
Just as an oil exporting country gains from a higher price of oil even though it may be a major oil consumer also.
- 18.
Since we are concerned with a single household, we drop the subscript h.
- 19.
These explain the point made in footnote () above.
- 20.
In a more comprehensive and realistic model, in which there would also be domestically produced consumption goods, the values of individual shares in these would also be part of the sharing rule. See Apps and Rees (2001).
- 21.
See Apps and Rees (2001) for an approach to this. Note that the functional form of the sharing rule is implied by the forms assumed for the HWF and the individual indirect utility functions.
- 22.
For a comprehensive discussion of how this model relates to the existing life cycle literature see Chap. 5 of Apps and Rees (2009).
- 23.
This is supported by panel data studies. See, for example, Shaw (1994).
- 24.
For each activity episode, information is recorded for a “primary” and, if relevant, a “secondary” activity. Where primary and secondary activities are reported, the weighting used is 0.6:0.4.
- 25.
This gives samples containing 2,085 records from the TUS and 4,064 records from the HES. Less than 4% of records report negative incomes in the HES sample.
- 26.
Private income is defined by the ABS as all income from wages, investments, etc. Government benefits are not included.
- 27.
Of course, still more extreme would be that transfers are made from the lower to the higher income partner, or that the higher income partner transfers so much that the lower income partner ends up with higher income/consumption. We do not pursue these possibilities here, however.
- 28.
In Apps and Rees (1996) we refre to this model as the “transfer model” to distinguish from our more plausible “exchange model”.
- 29.
Gross wage rates are computed from hours and earnings data, and the predicted values are based on regression models estimated on data for workers, with the Heckman correction for selectivity applied in the estimation of the female wage equation.
- 30.
The same argument can be applied to the market income of the female partner (as second earner) in phase 2 because much of her net income will be spent on buying in child care.
- 31.
Apps and Rees (2001) show that when parental time cost of child care is included in the analysis of intrahousehold shares, the “cost” of a child is close to that of an adult.
- 32.
Note that adding the opportunity cost of leisure to net income and the cost of home production gives full income. In Apps and Rees (2009, Chap. 5), we obtain a U-shaped profile of full income. We attribute this to an imperfect capital market in which the borrowing rate is above the lending rate.
- 33.
In some countries, e.g. the USA, it is argued that this could be unconstitutional.
- 34.
Equal to the sum of consumptions of market goods, household goods and leisures.
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Apps, P., Rees, R. (2011). Household Time Use, Inequality and Taxation. In: Molina, J. (eds) Household Economic Behaviors. International Series on Consumer Science. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-9431-8_3
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