Abstract This paper examines the sensitivity of inequality and poverty measures to the adult equivalence scale and the unit of analysis. Comparisons are made using parametric equivalence scales, and income units include individuals, equivalent adults and households. the adult equivalent scale for the particular commodity, dj is the adult equivalent scale for income, a is the regression constant, and b is the income elasticity.

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This paper examines the sensitivity of inequality and poverty measures to the adult equivalence scale and the unit of analysis. Comparisons are made using parametric equivalence scales, and income units include individuals, equivalent adults and households. The role of the correlation between equivalent income and household size, and the weight attached to children, is . This paper examines the sensitivity of inequality and poverty measures to the choice of adult equivalence scales and the type of income unit examined. Comparisons are made using parametric equivalence scales, and income units include individuals, equivalent adults and households. The results are based on HES data for total expenditure.

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. An adult equivalence scale is defined as the proportionate increase in income per adult necessary to maintain a certain level of household living standard given some change in demographic circumstances (typically, the introduction of children). Values for such scales might be obtained in any of a number of ways.

1 adult 1 1 1 1 1 2 adults 2 1 2 adults, 1 child 3 1 2 adults, 2 children 4 1 2 adults, 3 children 5 1 Elasticity1 1 0 1 Using household size as the determinant, equivalence scales can be expressed through an "equivalence elasticity".