Poverty, inequality and welfare measures using consumption-based Engel-derived equivalence scales in the Philippines
Date
2025-12-16
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Abstract
This paper provides Philippine-specific empirical evidence on the relationship of household size and consumption on food share as a welfare proxy and how poverty and inequality measures are affected when equivalized measures are utilized as opposed to per-capita expenditure measures. Earlier studies made by Balisacan (1992) and Albert et al. (2024) argued mixed evidence on the magnitude of economies of scale, thus emphasizing significant economies of scale. Despite this, recent studies introduced by Gibson (2002), Deaton and Paxson (1998), Lanjouw and Ravallion (1995), and Dudel et al. (2021) proposed that effects decreased as household and demographic composition effects were considered. Hence, following Engel demand theory and welfare-consistent equivalence scaling, an Engel-curve
framework following Deaton-Paxson (1998) was estimated to determine the localized empirical context of the relationship between food share as a percentage of total expenditure, size of households, and the socioeconomic and demographic composition of households in the Philippines. This was compared with benchmark scales like the Square root and modified OECD models. These models are derived using survey-weighted microdata from the 2023 Family Income and Expenditure Survey (FIES). Results showed that the current per-capita expenditure approach understates welfare for larger-size households. Equivalizing households reclassifies inequality and welfare with varying intensity between methods. This proposes the need for the consideration of equivalence-scale-adjusted measures to properly target demographics for public policy and poverty alleviation. This study provides preliminary and foundational empirical evidence for welfare measurements at PSA’s institutional level.
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Keywords
Poverty, Welfare measure, Engel-curve