Equivalence scales and consumption inequality: a study of household consumption patterns in italy
This paper utilises unit record survey data on expenditures and incomes of Italianhouseholds of different demographic profiles to estimate consumption equivalence scales whichmeasure the relative levels of spending required by households of different composition to attain givenlevels of utility. The equivalence scales have been obtained from the parameters of a few alternativeversions of a rank 3 complete demand system with demand shifters. Among the demographic variablesincluded in the models, the type of housing tenure and the age of children have special relevance. We have also computed the expenditure elasticities for the most common types of households and analysed how deflating expenditure with the equivalence scales affects consumption inequality amonghouseholds. The analysis is developed within the framework of hypothesised utility maximising behaviour of households.
Equivalence scales; Rank 3 demand systems; Income inequality.
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