Home

>

Equivalence scales with endogeneity and base independence

This study estimates food budget share equations to calculate household equivalence scales that address both base-independence and potential endogeneity, even though an instrument that satisfies the usual exclusion restriction may not be available. The application incorporates semi-parametric methods, control functions and heteroscedasticity instrumentation. The application is founded on the most recent income and expenditure data that is available for South Africa. We find that endogeneity matters, and that failing to account for it leads to overstated equivalence scales in nearly every circumstance. When we fit our calculated scales to a typical (Α + κΚ)Ψ equivalence structure via non-linear least squares, we find values of κ near unity and values of Ψ mostly below 0.5. Thus, our analysis suggests that a square-root scale is more appropriate than other scales that have been used to examine poverty and inequality in South Africa.

Working Paper 874
1 February 2022
SHARE THIS Working Paper PUBLICATION:

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...
Workshop