Household Consumption Equivalence Scales: Some Estimates from New Zealand Household Expenditure and Income Survey Data

Abstract

This paper uses data on expenditures and incomes of New Zealand households of different demographic profiles to construct equivalence scales. The scales are useful in estimating the relative levels of spending required by the households to attain a given level of utility. Preference consistent ‘complete demand systems’ are analyzed to test for the demographic effects on the consumption patterns of households. Equivalence scales for respect to specific items of consumption as well as total consumption are worked out from the observed consumption behaviour of households. The results are largely in line with those found in existing similar studies both in Australia and New Zealand. To the best of our knowledge, this is the first attempt at constructing equivalence scales with New Zealand household budget data in the framework of hypothesized utility maximizing behaviour of households.