Abstract
An equivalence scale is a measure of the cost of living of a household of a given size and demographic composition, relative to the cost of living of a reference household (usually a single adult), when both households attain the same level of utility or standard of living. Equivalence scales are difficult to construct because household utility cannot be directly measured, which results in economic identification problems. Applications of equivalence scales include measurement of social welfare, economic inequality, poverty, and costs of children; indexing payments for social benefits, life insurance, alimony, and legal compensation for wrongful death.
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Lewbel, A., Pendakur, K. (2018). Equivalence Scales. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2056
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2056
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