Global Study On Child Poverty And Disparities (PDF) - Social Policy ...

Box 1: Child poverty and equivalence scales
Equivalence scales take into account the different resources required by households that differ in size and composition
in terms of the number of adults and children, as well as the economies of scale within households.
Equivalence scales can be expressed as an elasticity – how much does the addition of an extra member in a
household change the total level of resources that the household needs in order to achieve a specified standard
of living?
At one extreme we could assume that household needs do not change with the addition of extra members: a
household with five members needs no more than a household with one or two members. In this case, the elasticity
would be zero. The assumption of zero elasticity is unrealistic; additional household members obviously
must be fed and clothed. At the other extreme, it could be assumed that the elasticity is one – that is, each additional
household member needs as much as a single adult. While this is more realistic than assuming an elasticity
of zero, it is also unrealistic, since young children, for example, do not need as much food as adults, and some
goods benefit from economies of scale – for example, it does not cost twice as much for a two-person household
to cook dinner as for a single-person household.
Equivalence scales are thus assumed to have an elasticity of between 0 and 1. The Table below shows a range
of scales used in different studies and the elasticities associated with them. For example, most of the results
in this report use the UNDP equivalence scales, which are developed as part of the process of specifying the
poverty lines for different types of households in Vanuatu. The UNDP scale assumes that each additional adult
needs as much as the first adult in a household, but that each child only needs half as much as an adult. This
produces an elasticity of around 0.75. Many overseas studies use either the modified OECD equivalence scales
or the square root scale. The modified OECD scale assumes that an additional adult requires half as much as
the first adult, and each child requires 30 per cent of what an adult needs. The square root scale assumes that
each additional person, adult or child, adds about 40 per cent and then about 30 per cent, and that each additional
person needs slightly less than the previous person. Each of these scales has a lower elasticity than the
UNDP scales. In the Table below, ‘1.0’ stands for the needs of a household containing one adult only
Equivalence scales
Household size
Per-capita income
(elasticity = 1)
UNDP
(elasticity = 0.75)
modified OECD
(elasticity = 0.53)
Square root
(elasticity = 0.50)
Household income
(elasticity = 0)
1 adult 1.0 1.0 1.0 1.0 1
2 adults 2.0 2.0 1.5 1.4 1
2 adults, 1 child 3.0 2.5 1.8 1.7 1
2 adults, 2
children
2 adults, 3
children
4.0 3.0 2.1 2.0 1
5.0 3.5 2.4 2.2 1
The use of different scales can produce quite different estimates of poverty. As can be seen from the Table, the
UNDP scale assumes that a household of five people (approximately the average household size in Vanuatu)
needs 3.5 times as much as a single-person household, while the modified OECD scale assumes that a household
of five people needs 2.4 times as much as a single person, and the square root scale assumes that this
household needs 2.2 times as much as a single person. Different scales therefore produce different poverty lines
for each household type, and estimated poverty rates therefore differ. For example, if the modified OECD equivalence
scale is used rather than the UNDP scale, then the estimated poverty rate for children would be reduced by
up to 60 per cent.
Separate FPLs have been calculated (VNSO, ADB and UNDP 2008) for both national and sub-national
dimensions for three areas (rural, Port Vila and Luganville). They were estimated from the actual food
expenditure patterns recorded in HIES survey diaries for households in the lowest three deciles of
expenditure, measured in per-capita adult-equivalent terms.
34