Working Paper: NBER ID: w0230
Authors: Edward P. Lazear; Robert T. Michl
Abstract: This paper is another contribution to the vast literature which addresses this issue: comparison of household income per capita among households of different structures requires judgment about the relationship between real income and family size. Our work uses a revealed preference approach in which household size/structure variables are included in empirical demand studies and the estimated coefficients on these variables are used to infer equivalence; it differs from many of the other studies not in basic concept but in its empirical strategy. While most studies build family composition effects into a relatively formal structural model of demand and impose considerable restriction in order to obtain an estimable system, we use a reduced-form approach which requires much less of the data.
Keywords: Family size; Income distribution; Equivalence scales; Economic well-being
JEL Codes: I32; D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family size (J12) | rate of transformation between nominal income and real service flows (F16) |
| family size (J12) | effective price of services (P22) |
| market bundle costing 1000 units (D41) | service flow for single-person household (D10) |
| market bundle costing 1000 units (D41) | service flow for two-person household (D19) |
| family size (J12) | well-being at lower nominal income levels (I31) |