Abstract
PurposeThe authors aim to demonstrate the impact of allowing for unequal intra-household distribution of resources on income poverty and income inequality.Design/methodology/approachThe paper applies a collective consumption model to study the intra-household distribution of resources in Visegrád countries (V4). It utilises subjective financial satisfaction as a proxy for indirect utility from individual consumption to estimate the indifference scales within couples instead of the traditional equivalence scale. The European Union Statistics on Income and Living Conditions (EU-SILC) 2013 and 2018 data are applied.FindingsThis study’s results indicate substantial economies of scale from living in a couple that are generally higher than implied by the commonly applied equivalence scale. The sharing rule estimates suggest that at the mean of distribution factors, women receive a consumption share between 0.4 and 0.6; however, some of the results are close to an equal sharing of 0.5. The female consumption share rises with her contribution to household income. Regarding income poverty and inequality, the authors show that both these measures might be underestimated in the traditional approach to equal sharing of resources.Originality/valueThe authors add to the empirics by estimating indifference scales for Czechia (CZ), Hungary (HU), Poland (PL) and Slovakia (SK), countries that have not been involved in previous research.
Highlights
Comparison of income levels across households of different size and composition is a crucial issue for many political considerations in the social area, including the measurement of social inequalities and poverty, the calculation of means-tested social benefits or when designing tax system and other income-related policies
We estimate the structural parameters of the household consumption function and the allocation of resources within households to examine how income-based poverty and inequality measures differ by applying indifference scales instead of traditional equivalence scales
The highest female indifference scales are in PL, exceeding 0.80 at the mean of distribution factors in both periods, while HU and SK have moderate levels, 0.65–0.76, in the two periods
Summary
Comparison of income levels across households of different size and composition is a crucial issue for many political considerations in the social area, including the measurement of social inequalities and poverty, the calculation of means-tested social benefits or when designing tax system and other income-related policies. We use the 2013 and 2018 European Union Statistics on Income and Living Conditions (EU-SILC) data on subjective financial satisfaction as a measure of indirect utility from individual consumption and aim to identify possible bias in the equivalence scale estimate due to unequal returns to scale of particular household members in V4, i.e. CZ, SK, Hungary (HU) and Poland (PL). We estimate the structural parameters of the household consumption function and the allocation of resources within households to examine how income-based poverty and inequality measures differ by applying indifference scales instead of traditional equivalence scales.
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