Project Grant 20236702439498

MYRIAD POLICY DECISIONS DEPEND ON THE IMPLICIT OR EXPLICIT COMPARISONS OF INDIVIDUAL COST OF LIVING VALUES ACROSS HOUSEHOLDS WITH DIFFERENT COMPOSITIONS. PEOPLE LIVING IN LARGE HOUSEHOLDS BENEFIT FROM THE ECONOMIES OF SCALE OF SHARED OR JOINT CONSUMPTION. ONE-PERSON HOUSEHOLDS CANNOT ACHIEVE INTRAHOUSEHOLD ECONOMIES OF SCALE, AND IT CREATES COST OF LIVING DISPARITIES AMONG HOUSEHOLDS OF DIFFERENT COMPOSITIONS. THEREFORE, ESTABLISHING ROBUST COST OF LIVING ESTIMATES NOT CONFOUNDED WITH THE HOUSEHOLD SIZE IS OF PARTICULAR INTEREST TO RESEARCHERS AND POLICYMAKERS. HOW MUCH WOULD A TWO-PERSON HOUSEHOLD NEED TO ATTAIN THE SAME STANDARD OF LIVING AS A ONE-PERSON HOUSEHOLD WITH A MONTHLY EXPENDITURE OF $1,000? TO ANSWER THIS QUESTION, RESEARCHERS NEED TO EMPIRICALLY ESTIMATE THE EQUIVALENCE SCALES WHICH COMPARE ECONOMIC WELLBEING OF HOUSEHOLDS OF DIFFERENT COMPOSITIONS. HOWEVER, EQUIVALENCE SCALES ARE DIFFICULT TO CONSTRUCT BECAUSE HOUSEHOLD UTILITY CANNOT BE DIRECTLY MEASURED, WHICH RESULTSIN ECONOMETRIC IDENTIFICATION PROBLEMS. THIS PROJECT WILL BE THE FIRST COMPREHENSIVE STUDY THAT EMPIRICALLY ESTIMATES THE EQUIVALENCE SCALES AMONG U.S. HOUSEHOLDS OVER THE PAST 50 YEARS. WE WILL USE (I) UTILITY-BASED OBJECTIVE METHODS AND HOUSEHOLD-LEVEL SCANNER DATA TO ESTIMATE OBJECTIVE EQUIVALENCE SCALES, (II) LIFE SATISFACTION SURVEYS FROM A NATIONALLY REPRESENTATIVE SAMPLE TO MEASURE SUBJECTIVE EQUIVALENCE SCALES, AND (III) BAYES THEOREM TO DEVELOP A NEW EQUIVALENCE SCALE THAT COMBINES THE INFORMATION CONTENT OF BOTH METHODS TO PRODUCE A THIRD EQUIVALENCE SCALE ESTIMATE WHICH IS MORE FLEXIBLE AND EFFICIENT. THE ESTIMATED EQUIVALENCE SCALES COULD BE WIDELY APPLIED, INTER ALIA, TO DEFINE THE POVERTY LINE, EVALUATE SOCIAL INEQUALITY AND POVERTY, CALIBRATE SOCIAL SAFETY NET PAYMENTS, MEASURE THE COSTS OF RAISING CHILDREN, AND CALCULATE PAYMENTS FOR LIFE INSURANCE, ALIMONY, AND LEGAL COMPENSATION FOR WRONGFUL DEATH.