1 / 13

Adjusting for Family Composition and Size

Adjusting for Family Composition and Size. Module 4: Poverty Measurement and Analysis February, 2008. Adjusting for Family Composition and Size. Ultimate goal is to arrive at a money metric of individual welfare.

denisewalker
Télécharger la présentation

Adjusting for Family Composition and Size

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Adjusting for Family Composition and Size Module 4: Poverty Measurement and Analysis February, 2008

  2. Adjusting for Family Composition and Size • Ultimate goal is to arrive at a money metric of individual welfare. • Consumption (and income) aggregates are usually constructed at the level of the household. • Convention is to divide household consumption by the number of family members to arrive at a measure of per capita consumption. • This approach sidesteps two issues: • Different people may have different needs • The cost per person of reaching a certain welfare level may be lower in large households than small ones.

  3. Differences in needs • In principle equivalence scales can be used to adjust for differences in needs. • E.g. If a child needs half as much as an adult, then a two adult - two child household will consist of three equivalentadults. • If the total consumption of household is 120 then equivalent-consumption will equal 40. All four individuals will be allocated this equivalent-consumption. • Where do equivalence scales come from? • Huge range of candidate scales

  4. Differences in Needs • Nutritional scales– derived from health studies. At best can be used to deflate food expenditures. • Behavioral scales– econometric estimates based on observed allocations. Major difficulties with identification. For example, if we observe that female children get less, do they need less? Or is it that they are systematically discriminated against? • Little guidance as to which scales are best. One option to conduct sensitivity analysis. (India example)

  5. Household Type Equivalence scales (1,1,1) (1,1,0.6) (1,0.8,0.6) (1,0.7,0.4) All households 63.4 63.2 62.9 63.8 Male-headed 63.8 63.6 63.5 64.5 Female-headed 57.7 57.4 54.3 52.7 Widow-headed 58.3 61.9 58.2 58.6 Extended; male-headed 68.2 69.5 67.6 67.4 The head-count ratio and equivalence scales Source: Drèze and Srinivasan (1997), Table 3. Note: The equivalence scales are written as triplets indicating the weights for ‘adult male’, ‘adult female’ and ‘child’, in that order.

  6. Differences in Needs • We often find that poverty profiles do not change much as a result of equivalence scale adjustments. • Use of per capita welfare measure may not be too misleading • This is an empirical question that needs to be checked on a case-by-case basis.

  7. Economies of Scale in Consumption • The use of a per capita measure of consumption imposes an assumption of no economies of scale in consumption. • Where might such economies come from? • Consumption of public goods within the household (radio, water pump) • Bulk purchase discounts on perishable food items • Economies in food preparation (fuel, time)

  8. Economies of Scale in Consumption • Suppose money metric of consumer’s welfare has an elasticity of θ with respect to household size. Then welfare measure of a typical member of any household is measured in monetary terms by:

  9. Economies of Scale in Consumption • Suppose that ρ is the proportion of household expenditure on purely private goods, and 1- ρ is allocated to public goods. • Then the correct monetary measure of per-capita welfare is: • Solving for θ yields:

  10. Economies of Scale in Consumption • In Ecuador, average household size is 4.76. • If ρ =0.9 then θ=0.8 • If ρ =0.7 then θ=0.51 • If average size = 6 • ρ =0.9 then θ=0.77 • ρ =0.7 then θ=0.49 • Problem, as with equivalence scales, is that there isn’t a good way of estimating θ • Best bet is sensitivity analysis again. • (India Example)

  11. Household Type Mean size Economies of scale parameter θ 1 0.8 0.6 0.4 All households 5.35 63.4 59.6 54.5 49.5 Male-headed 5.56 63.8 59.4 53.9 48.6 Female-headed 3.60 57.7 61.6 62.0 62.6 Widow-headed 3.32 58.3 63.8 65.1 66.2 Extended; male-headed 6.78 68.2 60.3 51.0 43.5 The head-count ratio and economies of scale Source: Drèze and Srinivasan (1997), Table 4.

  12. Economies of Scale in Consumption • Message now is that the per capita assumption is not innocuous. • Conclusions as to the relative poverty of large households (many children) versus small (elderly) are usually quite sensitive. • Big issue in regions (ECA) where there are big debates regarding public spending priorities (pensions versus child benefits) • Note, over time, economies of scale parameters could evolve (Lanjouw, et al, 2004)

  13. Further reading • Deaton, A. and Paxson, C. (1998) ‘Economies of Scale, Household Size and the Demand for Food’, Journal of Political Economy, 106(5): 897-930. • Lanjouw, P.F. and Ravallion, M. (1995): Poverty and Household Size, Economic Journal, Vol 105, No. 433. • Lanjouw, J., Lanjouw, P., Milanovic, B., and Paternostro, S. (2004) Economies of Scale and Poverty: the Impact of Relative Price Shifts During Economic Transition, Economics of Transition 12(3) 509-536.

More Related