Adult-equivalence scales and the economic implementation of interpersonal comparisons of well-being

Equivalence Scale Exactness (ESE) or Independence of Base (IB), a condition on household preferences and interpersonal comparisons, makes adult-equivalence scales independent of utility levels. ESE is characterized by Income-Ratio Comparability (IRC) which assumes that utility equality is preserved by income scaling. If ESE/IRC is a maintained hypothesis, equivalence scales can be estimated from behaviour alone if preferences are not piglog. This condition is not met by a family of translog expenditure functions or by the Almost Ideal Demand System. A translog expenditure function can be used for the reference household, however, together with an independent specification of the equivalence scale.Earlier versions of this paper 1987–1992] have been presented at Amsterdam, Augsburg, Barcelona, Bilbao, CORE, Essex, GREQE, Kiel, Leyden, Madrid, Southhampton, Toulouse, UBC, and Valencia. We thank the seminar participants and the referees of this journal, and are especially indebted to Kenneth Arrow, Martin Browning, Dale Jorgenson, Joseph Ostroy, Shelley Phipps, J. Ruiz-Castillo, Daniel Slesnick, Terry Wales and John Weymark. We also thank Amartya Sen whose remarks on another paper inspired the approach we have taken in this one.