Long abstract

Publications & Documents

The needs of a household grow with each additional member but – due to economies of scale in consumption– not in a proportional way. Needs for housing space, electricity, etc. will not be three times as high for a household with three members than for a single person.

With the help of equivalence scales each household type in the population is assigned a value in proportion to its needs. The factors commonly taken into account to assign these values are the size of the household and the age of its members (whether they are adults or children). A wide range of equivalence scales exist, many of which are reviewed in Atkinson et al. (1995). Some of the most commonly used scales include:
• “OECD equivalence scale”. This assigns a value of 1 to the first household member, of 0.7 to each additional adult and of 0.5 to each child. This scale (also called “Oxford scale”) was mentioned by OECD (1982) for possible use in “countries which have not established their own equivalence scale”. For this reason, this scale is sometimes labelled “(old) OECD scale”.
• "OECD-modified scale". After having used the “old OECD scale” in the 1980s and the earlier 1990s, the Statistical Office of the European Union (EUROSTAT) adopted in the late 1990s the so-called “OECD-modified equivalence scale”. This scale, first proposed by Haagenars et al. (1994), assigns a value of 1 to the household head, of 0.5 to each additional adult member and of 0.3 to each child.
• Square root scale. Recent OECD publications comparing income inequality and poverty across countries use a scale which divides household income by the square root of household size. This implies that, for instance, a household of four persons has needs twice as large as one composed of a single person. However, some OECD country reviews, especially for Non-Member Economies, apply equivalence scales which are in use in each country