Abstract
Equivalence Scale Exactness (ESE) or Independence of Base (IB), a condition on household preferences and interpersonal comparisons, makes adult-equivalence scales independent of utility levels. ESE is characterized by Income-Ratio Comparability (IRC) which assumes that utility equality is preserved by income scaling. If ESE/IRC is a maintained hypothesis, equivalence scales can be estimated from behaviour alone if preferences are not piglog. This condition is not met by a family of translog expenditure functions or by the Almost Ideal Demand System. A translog expenditure function can be used for the ‘reference’ household, however, together with an independent specification of the equivalence scale.
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Blackorby, C., Donaldson, D. Adult-equivalence scales and the economic implementation of interpersonal comparisons of well-being. Soc Choice Welfare 10, 335–361 (1993). https://doi.org/10.1007/BF00182510
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DOI: https://doi.org/10.1007/BF00182510