ADULT-EQUIVALENCE SCALES AND THE ECONOMIC IMPLEMENTATION OF INTERPERSONAL COMPARISONS OF WELL-BEING

Equivalence Scale Exactness (ESE) or Independence of Base (IB), a cond ition on household preferences and interpersonal comparisons, makes ad ult-equivalence scales independent of utility levels. ESE is character ized by Income-Ratio Comparability (IRC) which assumes that utility eq uality is preserved by income scaling. If ESE/IRC is a maintained hypo thesis, equivalence scales can be estimated from behaviour alone if pr eferences are not piglog. This condition is not met by a family of tra nslog expenditure functions or by the Almost Ideal Demand System. A tr anslog expenditure function can be used for the 'reference' household, however, together with an independent specification of the equivalenc e scale.