(DP 1992-04) Equivalence Scale and Poverty Assessment in a Poor Country

Abstract

The paper uses household expenditure pattern to estimate equivalence scales for the cost of children in Philippine rural and urban areas. It then employs these estimates in determining aggregate poverty. The paper shows that the practice of assessing aggregate poverty based on total household expenditure (or income) tends to substantially overstate aggregate poverty. In the absence of applicable equivalence scales, much improvement in aggregate poverty assessment in poor countries can be obtained if some attempts are made to fully adjust even only for household size.