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Using Panel Data on Income Satisfaction to Estimate Equivalence Scale Elasticity
Author(s) -
Schwarze Johannes
Publication year - 2003
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/1475-4991.00092
Subject(s) - panel data , german , econometrics , elasticity (physics) , happiness , economics , equivalence (formal languages) , income elasticity of demand , subjective well being , mathematics , psychology , social psychology , geography , materials science , archaeology , discrete mathematics , composite material
In this paper, the equivalence scale elasticity will be estimated by using individual panel data on income satisfaction from the German Socio‐Economic Panel Study (GSOEP). Satisfaction or happiness data have been more frequently used by economists in recent years to analyze individual well‐being. The approach differs from other subjective approaches as respondents are requested to evaluate current income rather than income in hypothetical situations. The estimated scale elasticity is higher compared to those from other subjective approaches based on German data. In addition, panel data enable different scale use by the respondents to be controlled. It can be shown that elasticity decreases when unobserved fixed‐effects are controlled for.