The sensitivity of income inequality to choice of equivalence scales

To account for the fact that a household's needs depend on its size and com position most studies on income inequality adjust the observed household in comes by equivalence scales. However, since the rationale for choosing a sp ecific scale is rather vague the importance of testing the sensitivity of i ncome inequality estimates to choice of equivalence scales has long been ac knowledged. The sensitivity studies in the literature are restricted to equ ivalence scales that do not depend on the income level of the reference hou sehold which means that the effect of a rise in the household size on the s cale rate does not depend on whether the household is poor or rich. By usin g Norwegian micro-data it is shown that the introduction of an income-depen dent scale produces results that are in conflict with the widespread view o f robustness of results to choice of equivalence scales.