Asset Bias in Household Needs Measurement

Publikation: Working/Discussion PaperWU Working Paper

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Increasingly, the estimation of household equivalence scales relies on subjec-tive data. This approach challenges not only traditional methodology, but alsoprovides systematically lower estimates of household needs compared to other methods. I offer a novel take on this puzzle and argue that the failure to accountfor private wealth in subjective measurement is part of the explanation of whyhousehold financial needs appear to be low. Wealthy survey respondents claimto be satisfied with less income, as they can draw on their asset buffer to main-tain a given living standard. Capitalising on SOEP survey data, I find that thefinancial needs of a household comprising five members relative to a referencehousehold might be underestimated by up to 20% if wealth is not accountedfor. Equivalence scales are central to poverty and inequality measurement, thedesign of social transfer systems and many other applications. Therefore, it is crucial to account for asset ownership when drawing on estimates that rely onthe subjective methodology.
PublikationsstatusVeröffentlicht - 2021


ReiheINEQ Working Paper Series

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

  • 502046 Volkswirtschaftspolitik
  • 504007 Empirische Sozialforschung
  • 504003 Armut und soziale Ausgrenzung
  • 509012 Sozialpolitik

WU Working Paper Reihe

  • INEQ Working Paper Series