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ISER Working Paper Series 2012-10

Two can live as cheaply as one... but three's a crowd

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Publication date

29 May 2012

Abstract

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.

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  1. Two can live as cheaply as one... but three's a crowd

    Christopher R. Bollinger, Cheti Nicoletti, and Stephen Pudney

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