Equivalence scales for children

Abstract

Family circumstances, of which the number and age of children are two of the more important manifestations, are taken into account in a number of contexts. For example, the relationship between consumption and household composition is central to the emerging literature on the economics of fertility [Willis (1973) or Leibenstein (1974)J. At a less abstract level Seneca and Taussig (1971) adopt equal proportionate expenditure on food or necessities as a means of placing household income on a comparable basis when assessing the horizontal impact of income tax in the U.S. The number of families in the U.K. with low resources relative to their needs is enumerated by Howe (1971) using Supplementary Benefit scale rates to standardise income net of housing expenditure for family composition. Alternatively, Stark (1972) analyses the distribution of income by taking the geometric mean of some equivalent income scales used in earlier studies. This expedient is followed by Muellbauer (1974a) and (1974~) in assessing the effects of price inflation and international price differences respectively on inequality. In their pioneering study of family budgets Prais and Houthakker (1955) argue that commodity expenditure and income will not necessarily be inffuenced to the same extent by household composition. There may be economies of scale in housing and durables consumption with increasing family size but no economies in the case of food expenditure. Thus household circumstances are taken into account in studies of fertility, the incidence of taxation, poverty, income distribution, the impact of price changes, and demand analysis. However, a range of methods has been adopted