Abstract
Extended Linear Expenditure System (ELES) household scales use the income variable of the household in identifying a system of Engel curves. Income data in household surveys may contain declaration errors which result in the errors-in-variables problem. A composite error distribution which incorporates both measurement and declaration errors into the model is proposed and the ELES scales are re-estimated. They are found to be sensitive to income declaration errors and biased measures of household welfare.
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