Econometric Identification of the Cost of Maintaining a Child

Abstract

The paper estimates the cost of maintaining a child, of different ages, the cost of being a single and the cost of additional adults present in a family with the aim of making the income levels of different households comparable. The study investigates the issue of econometric identification of equivalence scales within a demand system modified to include demographic characteristics consistently with economic theory. It shows that a robust estimation of equivalence scales must take into formal consideration the problem of econometric identification. The estimation also proposes an encompassing demographic specification which permits isolation of the costs due to differences in needs and differences in household life-styles and scale economies.Equivalence scales, identification, interhousehold comparisons, economies of scale