Subjective poverty equivalence scales for Euro Zone countries

Abstract

We estimate subjective equivalence scales for the whole Euro Zone as well as its individual constituent countries using the European Income and Living Conditions (SILC) data. Importantly, by using minimum needs income question our approach does not require the specification of a complete social welfare function. Our subjective scales increase consistently with household size and countries with well-developed welfare states (Netherlands, Germany, France, and Belgium) show greater economies of scale than less developed welfare states (Spain, Portugal, and Greece). Our approach also allows us to estimate the marginal cost of a child; we find that for the Eurozone adding the first child is more costly than adding a third adult and that the marginal cost of children declines. Comparing modified OECD and our subjective poverty rates we find that the subjective scales ‘redistribute poverty’ away from larger to smaller households.