Equivalence Scales and the Cost of Children: The Case of Household Splits in Denmark, France, Germany and the United Kingdom

Abstract

Couple households may separate over time. The OECD equivalence scale is used to compare the income situation of post separation households with the pre-separation households. This scale makes assumptions about the needs of adults and children as well as economies of scale. The impact of these assumptions is checked by varying the economy of scale factor; varying the cost of a child and varying the assumptions of allocating the cost of a child between households after separation. Our main finding is that the situation of the woman’s household relative to the man’s household remains the same as under the original OECD scale even when the assumptions are changed. We conclude, therefore, that our findings based on OECD scale are valid.