To measure poverty, incomes must be equivalized across households with different structures. In this paper, we use a very flexible ordered response model to analyze the relationship between income, demographic structure and subjective assessments of financial wellbeing drawn from the 1991-2008 British Household Panel Survey. Our results suggest the existence of large scale economies within marital/cohabiting couples, but substantial diseconomies from the addition of children or further adults. This pattern contrasts sharply with commonly-used equivalence scales, and is consistent with explanations in terms of the capital requirements associated with additions to the core couple.
Discussion Paper Number
Bollinger, Christopher; Nicoletti, Cheti; and Pudney, Stephen, "Two Can Live as Cheaply as One...But Three’s a Crowd" (2012). University of Kentucky Center for Poverty Research Discussion Paper Series. 31.