Demand Based Equivalence Scale Estimates for Australia and the UK

This paper compares alternative approaches for estimating equivalence scales from household expenditure data. Discussion focuses upon the limitations of cross-sectional household survey data, and the implications for model estimation. Taking into consideration the biases that are associated with alternative models, a demand system with Éxed price e_ects is identiÉed as the preferred equivalence scale estimation methodology using pooled cross-sectional survey data. The relativities of household expenditure estimated for Australia and the UK are similar, and suggest that there are likely to exist larger economies of scale in the UK.