National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Subjective Scales

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Suggested Citation:"Subjective Scales." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 174

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ADJUSTING POVERTY THRESHOLDS 174 The Rothbarth procedure does not suppose that adults derive welfare only from adult goods: adults and children share in the household expenditures on most goods—including food and shelter. The adult goods are special because they are not consumed by children, so that for them one observes the consequences of the resource diversion to the child uncontaminated by the additional expenditures generated by the child. The decline in expenditures in adult goods shows, not the decline in the living standards of the parents, but the amount of money that the parents have diverted to the child, which is the information needed. It is possible to raise objections to the Rothbarth procedure, just as it was possible to object to the Engel procedure. In particular, although children do not consume adult goods, their presence may alter their parents' tastes for adult goods. For example, prospective mothers are advised neither to smoke nor to consume alcohol during pregnancy. Similarly, the presence of a child or children in the household is likely to change the way the parents spend their leisure time and "spare" cash. As a result, it may be difficult or impossible to find pure adult goods—goods for which family consumption is not directly affected by the presence of children. Rothbarth's method is also confined to measuring the cost of children; it makes no contribution to measuring the cost of additional adults or the size of economies of scale. These objections, although real, are a good deal less fundamental than Nicholson's criticism of the Engel method (see Deaton and Muellbauer, 1986, for further discussion). Rothbarth's method, or closely related variants, has been used in the United States by a number of researchers (see, e.g., Lazear and Michael, 1988). Most of the several other methods for estimating equivalence scales that have been discussed in the literature in economics and econometrics (see Deaton and Muellbauer, 1980: Ch.8, and Browning, 1992, for reviews) are more ambitious than either the Engel or the Rothbarth procedures in that they attempt to measure the differential needs of adults and children on a commodity- by-commodity basis. They are also a good deal more complex than either the Rothbarth or the Engel methods, and, consequently, are much more difficult to interpret. In many cases, it is difficult to know what fundamental assumption is driving the results. For Engel, the food share indicates welfare, and for Rothbarth, adult goods indicate adult welfare, and it is these "identifying" assumptions that allow one to derive the scale. For the more complex schemes, the identifying assumptions are far from clear, which means that it is difficult to know exactly what is being measured or whether the concept is a sensible one. Subjective Scales If it is accepted that equivalence scales are based more on their plausibility than on empirical evidence, there is much to be said for simply asking people what

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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

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