An alternative semiparametric estimate of the base-independence equivalence scale: an application to US consumer expenditure survey data

Abstract

This study proposes a semiparametric estimate and a test for base-independence equivalence scale. Our semiparametric approach is based on nondensity weighted loss function in contrast to Pendakur's (1999) density weighted loss function. Simulation results indicate that our specification tends to produce a smaller bias in estimating the equivalence scale and thus a more reliable test for base-independence hypothesis. We also provide an application using US Consumer Expenditure Survey data.