Family Size Equivalence Scales and Survey Evaluations of Income and Well-Being

Abstract

ABSTRACTThe determination of the different needs of families of different compositions is necessary in order to ensure horizontal equity in tax/transfer policies. Despite the seeming simplicity of the problem, a consensus as to the appropriate means of determining relative need remains elusive. One approach which has been proposed has been to use social surveys to analyse the relationship between subjective evaluations of well-being and incomes. This paper examines such methods, and discusses the key assumptions upon which they rest. An explanation is advanced as to why these methods may lead to an understatement of the differences in relative needs of different family types.