Subjective equivalence scales in Eastern versus Western European countries

Abstract

We show that economies of scale estimated individually for each EU country differ from the officially adopted OECD-modified scale; the differences across the countries further confirm the prevailing East-West disparity. Using the minimum income question in the 2019 EU-Statistics on Income and Living Conditions survey, we demonstrate that applying the estimated country-specific subjective equivalence scales, instead of the uniform OECD-modified scale, results in up to a 6 pp change in the at-risk-of-poverty rate. If inadequate equivalence scales are used, the equivalised income fails to inform the statistics of income poverty and prevents national social policies from being correctly targeted.