Subjective Poverty Equivalence Scales for Euro Zone Countries

Abstract

While the idea behind subjective equivalence scales is generally attractive, subjective scales have been plagued by problems of inconsistency. We address this problem with new European Income and Living Conditions (SILC) datasets that are much larger in size than those available to previous researchers. We estimate subjective equivalence scales for the whole Euro Zone as well as its individual constituent countries. Our subjective scales increase consistently with household size. More importantly, we find that adding the first child is more costly than adding a third adult and that the marginal cost of children declines. Comparing modified OECD scale poverty rates to our subjective poverty rates (holding the overall poverty rate constant) we find that the subjective scales ‘redistribute poverty’ away from larger to smaller households.