Intertemporal Equivalence Scales

Static economic models based on complete demand systems are inadequate for estimating unconditional equivalence scales; in order to capture the effects of demographic changes on consumer behaviour, a life-cycle dynamic model is taken into account. Recent studies have presented and evaluated longitudinal equivalence scales and intertemporal cost of children but these cannot be applied in practice when equivalence scales are utilised in poverty or income distribution analyses. This paper presents intratemporal equivalent income scales, which are within period index numbers incorporating intertemporal consumer behaviour. The life-cycle model is estimated on the basis of the Italian Household Budget Survey from 1985 to 1994.