6. Conclusion
We have presented equivalence scales derived from a survey where subjects have been asked to assess the income needs of different hypothetical households given five levels of reference income of a reference household. We find that equivalence scales obtained negatively depend on the level of reference income. This finding strongly questions the results of previous studies where equivalence scales have been assumed to be constant. Obviously, this constancy assumption either means an overestimation of the needs of “rich” or the underestimation of the needs of “poor” multi-person households or the mis-specification of the needs of both. Second, the number of adults in the household turns out to be an important criterion for the evaluation of children needs. According to our respondents, the income needs of children are an increasing function of the number of adult household members. It is, therefore, necessary to broaden economic models with respect to this interaction.
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Schröder, C., Schmidt, U. (2005). A New Subjective Approach to Equivalence Scales: An Empirical Investigation. In: Schmidt, U., Traub, S. (eds) Advances in Public Economics: Utility, Choice and Welfare. Theory and Decision Library C:, vol 38. Springer, Boston, MA. https://doi.org/10.1007/0-387-25706-3_8
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