Stewart, Mark B. (2009) The estimation of pensioner equivalence scales using subjective data. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

Preview

PDF WRAP_Stewart_twerp_893.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (293Kb)

Abstract

This paper uses panel data on pensioners’ subjective evaluations of their financial positions to construct equivalence scales for pensioners. A pensioner couple is estimated to require an income 44% higher than a comparable single pensioner to reach the same standard of living. This is significantly less than the equivalence scale value implied by the ratio of state pension rates, the McClements equivalence scale value and the scale value derived from Engel curve estimation for food expenditure using the same data source. The estimated equivalence scale value is robust to variations in the definition of the pensioner sample, the measurement of income and the econometric model used.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Retirement income, Pensions, Welfare economics, Social security
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	March 2009
Number:	No.893
Number of Pages:	40
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Adapted As:	Stewart, M.B. (2009). The estimation of pensioner equivalence scales using subjective data. Review of Income and Wealth, (forthcoming).
References:	Atkinson, A.B., Bourguignon, F., 1990. “The design of direct taxation and family benefits”, Journal of Public Economics, 41, 3-29. Banks, J., Blundell, R., Lewbel, A., 1997. “Quadratic Engel curves and consumer demand”, Review of Economics and Statistics, 79, 527-539. Bellemare, C., Melenberg, B., van Soest, A., 2002. “Semi-parametric models for satisfaction with income”, Portuguese Economic Journal, 1, 181-203. Blundell, R., Lewbel, A., 1991. “The information content of equivalence scales”, Journal of Econometrics, 50, 49-68. Bradbury, B., 1989. “Family size equivalence scales and survey evaluations of income and well-being”, Journal of Social Policy, 18, 383-408. Bradshaw, J. and others, 2008. “A minimum income standard for Britain: What people think”, report to the Joseph Rowntree Foundation (available from www.jrf.org.uk). Browning, M., 1992. “Children and household economic behavior”, Journal of Economic Literature, 30, 1434-1475. Chamberlain, G., 1982. “Multivariate regression models for panel data”, Journal of Econometrics, 18, 5-46. Charlier, E., 2002. “Equivalence scales in an intertemporal setting with an application to the former West Germany”, Review of Income and Wealth, 48, 99-126. Chesher, A., Irish, M., 1987. “Residual analysis in the grouped and censored normal linear model”, Journal of Econometrics, 34, 33-61. Deaton, A., 1997. The Analysis of Household Surveys: A Microeconometric Approach to Development Policy, Baltimore: Johns Hopkins University Press. Deaton, A., Paxson, C., 1998. “Economies of scale, household size, and the demand for food”, Journal of Political Economy, 106, 897-930. Dubnoff, S., Vaughan, D., Lancaster, C., 1981. “Income satisfaction measures in equivalence scale applications”, Proceedings of the Business and Statistics Section of the American Statistical Association, 348-352. Gallant, A.R., Nychka, D.N., 1987. “Semi-nonparametric maximum likelihood estimation”, Econometrica, 55, 363-390. Greene, W., 2004. “The behaviour of the maximum likelihood estimator of limited dependent variablemodels in the presence of fixed effects”, Econometrics Journal, 7, 98-119. Kapteyn, A., van Praag, B., 1976. “A new approach to the construction of family equivalence scales”, European Economic Review, 7, 313-335. Levy, H., Zantomio, F., Sutherland, S., Jenkins, S.P., 2006. “Documentation for derived current and annual net household income variables, BHPS waves 1-14”, ISER, University of Essex. McClements, L.D., 1977. “Equivalence scales for children”, Journal of Public Economics, 8, 191-210. Machin, S.J., Stewart, M.B., 1990. “Unions and the financial performance of British private sector establishments”, Journal of Applied Econometrics, 5, 327-350. Muellbauer, J., 1979. “McClements on equivalence scales for children”, Journal of Public Economics, 12, 221-231. Mundlak, Y., 1978. “On the pooling of time series and cross section data”, Econometrica, 46, 69-85. Nelson, J.A., 1993. “Household equivalence scales: theory versus policy?”, Journal of Labor Economics, 11, 471-493. Pollak, R.A., 1991. “Welfare comparisons and situation comparisons”, Journal of Econometrics, 50, 31-48. Pollak, R.A., Wales, T.J., 1979. “Welfare comparisons and equivalence scales”, American Economic Review, 69, 216-221. Ruud, P.A., 1984. “Tests of specification in econometrics”, Econometric Reviews, 3, 211-242. Schwarze, J., 2003. “Using panel data on income satisfaction to estimate equivalence scale elasticity”, Review of Income and Wealth, 49, 359-372. Slesnick, D.T., 1998. “Empirical approaches to the measurement of welfare”, Journal of Economic Literature, 36, 2108-2165. Stewart, M.B., 1983. “On least squares estimation when the dependent variable is grouped”, Review of Economic Studies, 50, 737-53. Stewart, M.B., 2006. “A comparison of semiparametric estimators for the ordered response model”, Computational Statistics and Data Analysis, 49, 555-573. Taylor, M.F., (ed.), with Brice, J., Buck, N., Prentice-Lane, E., 2007. British Household Panel Survey User Manual, Colchester: University of Essex. Van Praag, B., 1991. “Ordinal and cardinal utility: an integration of the two dimensions of the welfare concept”, Journal of Econometrics, 50, 69-89. Verbeek, M., Nijman, T., 1992. “Testing for selectivity bias in panel data models”, International Economic Review, 33, 681-703. White, H., 1982. “Maximum likelihood estimation of misspecified models”, Econometrica, 50, 1-25. Wooldridge, J.M., 2002. Econometric Analysis of Cross Section and Panel Data, Cambridge: The MIT Press. Zaidi, A., Burchardt, T., 2005. “Comapring incomes when needs differ: equivalization for the extra costs of disability in the UK”, Review of Income and Wealth, 51, 89-114.
URI:	http://wrap.warwick.ac.uk/id/eprint/1324

Request changes to a record

Actions (login required)

View Item