Intertemporal equivalence scales and cost of children using panel data

Equivalence scales represent an indispensable tool in any welfare comparison among households; they deflate monetary income or total consumption in order to take into account economies of scale of the size and composition of the households. Although they are, by one consent, considered a necessary tool, there is no unanimity in the methodology to be used. 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 which 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 and which can be applied in presence of genuine panel data.