Using Equivalence Scales as Spatial Deflators: Evidence in Inter-Household Welfare Regional Comparisons from Italian HBS Micro-Data

Abstract

In inter-household welfare comparisons, equivalence scales have been traditionally used as a tool for making comparisons among households with different composition, as well as to assess the cost of additional household components, with focus on cost of children. No reference has been explicitly made to the time/space dimensions, except the time one implicit in the inter-temporal approach. No attention has been paid so far to a possible role of them in space framework. Based on previous works by the author and associate, this paper investigates the use of equivalence scales as inter-household income spatial deflators, through a geographically, socio-economically and demographically extended PS-GAIDS model named PGSEDS-GAIDS that allows to account not only for space, but also for social, economic and demographic variables other than number and age of additional components. By using the Italian Household Budget Survey micro-data base, evidence on Italian inter-regional household comparisons are obtained and discussed, showing that, despite several problems remain open and more than one remark can be made, it may be worth using equivalence scales in space domain.

This paper, although focusing on equivalence scales and their use in household welfare spatial comparisons, summarises the research work path the author has been following during the two year duration of the project: “Household Welfare Comparisons by Area in Italy by Means of Equivalence Scales, Poverty Indices and Deflated Gini Concentration Ratios”. The research has been supported by the Italian Ministry of Education, University and Research (Ministero dell’Istruzione, dell’Università e della Ricerca (MIUR)) in the framework of the 40% funds.

It travels over again the theoretical way covered, the developments met by author’s mental approach to the subject, the modifications brought in his way of looking at the equivalence scales and to their use in the field of household welfare measurement and comparisons. The author wishes to thank the attendants to the “International Seminar on Equivalence Scales, Household Behaviour and Welfare” held in Florence on June the 27^th—28^th, 2002 for the rich discussion of the paper and their valuable comments. Needless to say, he solely has the responsibility of any eventual errors.