Abstract
We discuss the theoretical properties (and the empirical results obtained for Italy in the years 1987–2000) of a recently-introduced method for the inclusion of demographic variables in complete demand systems. The main merit of the proposed procedure — labeled DM 2, or Decomposition Model of the effects of Demographic Metamorphosis — is that it permits researchers to decompose in two main components (“cost” and “style”) the effects on consumer behavior of any demographic characteristic, in a theoretically-consistent framework, with simple algebra, standard statistical software running on ordinary PCs, and only one cross section of data (i.e. with no variation in prices) — although applications to several years, with price variability, are possible, too.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Banks J, Blundell R, Lewbel A (1997) “Quadratic Engel curves and consumer demand”, The Review of Economics and Statistics 79(4): 527–539.
Barten AP (1964a) “Consumer Demand Functions under Conditions of Almost Additive Preferences”, Econometrica 32(l): 1–38.
Barten AP (1964b) “Family Composition, Prices and Expenditure Pattern”, in PE Hart, G Mills, JK Whitaker (Eds.), Econometric Analysis for National Economic Planning, Proceedings of the 16th Symposium of the Colston Research Society, London, Butter-worths: 277–292.
Blundell R, Lewbel A (1991) “The information content of equivalence scales”, Journal of Econometrics 50(1): 49–68.
Blundell R, Pashardes P, Weber G (1993) “What do we learn about consumer demand patterns from micro data?”, American Economic Review 83(3): 570–597.
Bollino CA, Perali F, Rossi N (2000) “Linear household technologies”, Journal of Applied Econometrics, 15: 275–287.
Bollino CA, Rossi N (1989) “Demographic variables in demand systems and related measures of the cost of changing family size”, Giornale degli economisti e Annali di economia, 9/10: 449–465.
Bourguignon F (1999) “The cost of children: may the collective approach to household behavior help?”, Journal of Population Economics 12(4): 503–521.
Browning M, Bourguignon F, Chiappori PA, Lechène V (1994) “Income and outcomes: a structural model of intrahousehold allocation”, Journal of Political Economy, 102(6): 1067–1097.
Christensen L, Jorgenson D, Lau L (1975) “Trascendental logarithmic utility functions”, American Economic Review 65(3): 367–383.
Cicali D, De Santis G (2002) “Estimating cohort fertility levels and differentials by socioeconomic characteristics with the own-children method and pseudo-panels”, Genus 58 (2): forthcoming.
Citro C, Michael R (Eds) (1995), Measuring Poverty: A New Approach, Washington DC, National Academy Press.
Deaton A, Muellbauer J (1980a) Economics and Consumer Behavior, Cambridge, Cambridge University Press.
Deaton A, Muellbauer J (1980b) “An almost ideal demand system”, American Economic Review 70(2): 312–326.
Deaton A., Muellbauer J. (1986) “On measuring child costs: with application to poor countries”, Journal of Political Economy 54(4): 720–744.
De Santis G, Maltagliati M (2001) “De gustibus non est disputandum? A new approach to the estimation of equivalence scales”, Methods and applications. Journal of the Italian Statistical Society 10(1-3): 211–236.
De Santis G, Maltagliati M (2002), “The use of prices in the DM2 complete demand system”, Proceedings of the 41A Scientific Meeting of the SIS, Milan, Vol. 2/2, pp. 187–190.
Gorman WM (1976) “Tricks with utility functions”, in Essays in Economic Analysis, The proceedings of the Associations of University Teachers of Economics, Sheffield.
Istat (various years) I bilanci di famiglia Household budgets, Roma.
Lancaster G, Ray R (1998), “Comparison of alternative methods of household equivalence scales: the Australian evidence on unit record data”, The Economic Record 74(224): 1–14.
Lancaster G, Ray R, Valenzuela MR (1999) “A cross-country study of equivalence scales and expenditure inequality on unit record household budget data”, Review of Income and Wealth 45(4): 455–482.
Patrizii V, Rossi N (1991) Preferenze, prezzi relativi e redistribuzione Preferences, relative prices, redistribution Bologna, Il Mulino.
Pollak RA, Wales TJ (1979) “Welfare comparisons and equivalence scales”, American Economic Review. Papers and Proceedings 69(2): 216–221.
Ray R (1983) “Measuring the cost of children. an alternative approach”, Journal of Public Economics 22(1): 89–102.
Ray R (1986) “Demographic variables and equivalence scales in a flexible demand system: the case of AIDS”, Applied Economics, 18,2: 265–278.
Rossi N (1988) “Budget share demographic translation and the aggregate almost ideal demand system”, European Economic Review 31: 1301–1318
Stone JRN (1954) “Linear expenditure systems and demand analysis: an application to the pattern of british demand”, Economic Journal 64: 511–527.
van Imhoff E, Odink JG (1994) “Household equivalence scales in the Netherlands: comparing different methods of measurement”, in O Ekert-Jaffé (Ed.) Standards of living and families: observation and analysis, Paris, John Libbey Eurotext: 207–230.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2004 Springer-Verlag Berlin Heidelberg
About this paper
Cite this paper
De Santis, G., Maltagliati, M. (2004). Equivalence Scales: A Fresh Look at an Old Problem. Theory and Empirical Evidence. In: Dagum, C., Ferrari, G. (eds) Household Behaviour, Equivalence Scales, Welfare and Poverty. Contributions to Statistics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2681-4_3
Download citation
DOI: https://doi.org/10.1007/978-3-7908-2681-4_3
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-0108-8
Online ISBN: 978-3-7908-2681-4
eBook Packages: Springer Book Archive