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Semi‐parametric estimation of consumption‐based equivalence scales: the case of Germany
Author(s) -
Wilke Ralf A.
Publication year - 2006
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.888
Subject(s) - equivalence (formal languages) , german , econometrics , parametric statistics , consumption (sociology) , economics , range (aeronautics) , engel curve , estimation , mathematical economics , mathematics , parametric model , statistics , discrete mathematics , geography , social science , materials science , management , archaeology , sociology , price index , composite material
Consumption‐based equivalence scales are estimated by applying the extended partially linear model (EPLM) to the 1998 German Income and Consumption Survey (EVS). In this model the equivalence scales are identified from nonlinearities in household demand. The econometric framework should not therefore impose strong restrictions on the functional forms of household expenditure shares. The chosen semi‐parametric specification meets this requirement. It is flexible, it yields $\sqrt{N}$ ‐consistent parameter estimates and it is consistent with consumer theory. Estimated equivalence scales are below or in the range of the expert equivalence scales of the German social benefits system. Copyright © 2006 John Wiley & Sons, Ltd.