JRC B2 Seminar: “How important are the unit of analysis and equivalence scales when measuring income poverty and inequality? Evidence from Ireland” – Mark Regan


We analyse the effect of varying equivalization scales and income-sharing units (households, tax-units and benefit-units) on inequality and poverty statistics using Irish microdata. We find that benchmark equivalence scales result in substantial variation in the degree of income poverty estimated at the household level, particularly for young children and the elderly. We test multiple permutations of child and adult weights in a set of hypothetical equivalence scales. Our simulation results show that over a range of commonly observed adult-child equivalence weights –0.5 to 0.7 for adults and 0.3 to 0.5 for children, Irish income poverty rates in 2019 ranged from 15.0 per cent to 19.5 per cent– most of this variation is attributable to changes in the adult weight. Inequality statistics tend to be less sensitive to the choice of equivalence scale but are sensitive to the choice of income-sharing unit. At the household level, the Gini coefficient varies between 0.29 and 0.32. At the tax-/benefit-unit level the range is elevated, with the Gini remaining stable over time but between 0.33 and 0.35. Other inequality metrics, such as the p90p10 ratio, exhibit increased volatility over the business cycle at sub-household unit levels.


Mark Regan is a researcher at the Economic and Social Research Institute (Dublin, Ireland) and is affiliated to Trinity College Dublin. He recently completed a PhD in Economics at University College Dublin and previously lectured in Trinity College Dublin. His research interests include tax-benefit policy analysis and labour market scarring.


Theano Kakoulidou is a researcher at the Economic and Social Research Institute (Dublin, Ireland) and she is also affiliated to Trinity College Dublin. Before that she has worked as a special advisor to the Greek Minister of Labour as well as members of the Hellenic Parliament, while finishing her PhD at the Athens University of Economics and Business. Her research interests include labour, public and welfare economics.