Adult equivalence scales, inequality and poverty∗

Abstract

This paper examines the sensitivity of inequality and poverty measures to the adult equivalence scale and the unit of analysis. Comparisons are made using parametric equivalence scales, and income units include individuals, equivalent adults and households. The role of the correlation between equivalent income and household size, and the weight attached to children, is examined analytically. Empirical results are based on New Zealand Household Expenditure Survey (HES) data for total expenditure. Further results using a variety of equivalence scales, for New Zealand, Australia, the UK and the OECD, are examined.