SOEPpapers on Multidisciplinary Panel Data Research at DIW Berlin This series presents research findings based either directly on data from the German SocioEconomic Panel study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences:

Income inequality and poverty risks receive a lot of attention in public debates and current research. To make income comparable across different types of households, applying the “(modified) OECD scale” – an equivalence scale with fixed weights for each household type – has become a quasi-standard in research. Instead, we derive a base-dependent equivalence scale allowing for scale weights that vary with income, building on micro-data from Germany. Our results suggest that appropriate equivalence scales are much steeper at the lower end of the income distribution than they are for higher income levels. We illustrate our findings by applying them to data on family income differentiated by household types. It turns out that using income-dependent equivalence scales matters for applied research on income inequality, especially if one is concerned with the composition, not just the size of the population at poverty risk.

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