Equivalence scales, Demand analysis, Censoring, D11, D12,

This article estimates expenditure-dependent equivalence scales for Italian couples with and without children. Following Donaldson and Pendakur (2006), the generalised absolute equivalence-scale exactness (GAESE) restrictions are incorporated into a translated quadratic almost ideal demand system. We obtain declining-with-expenditure equivalence scales, a pattern that tends to strengthen when the number of children increases. Thus, scale economies in current consumption are lower for families with poor expenditure capacities. We also show that families living in the South bear a substantial additional cost to achieve the same well-being of those living in the North. Finally, we find that ignoring the declining with expenditure pattern may involve a relevant understatement of measured inequality

The online version of this article unfortunately contains some errors, which were corrected as follows. Under heading Equivalence scales, Equation 17: in the equation, both delta(i) and beta(i) should have a hat. After equation 17, the sentence starting with ''Given the estimate of beta(i), Eq. 7…'' should become ''Given the estimate of beta(i), Eq. 17…''. Under heading Equivalence scales, sixth paragraph. The sentence ''Adding a child to an adult's couple is more expensive than adding a second child, but…'' should become ''Adding a child to an adult's couple is not more expensive than adding a second child and adding….'' Under heading Concluding remarks, second paragraph. The sentence ''As the reference household is a childless couple living in the centre, the scales imply significant household economies of scales going from one to two children, but adding a third child produces a higher marginal cost in all areas of Italy, a result in line with similar studies, so…'' should be corrected as follows: The online version of the original article can be found under