ABSTRACT
The aim of this chapter is to provide some measures of how equivalence scales change when household production is included in a broader definition of consumption. In Chapter 3 we stressed the importance of extending the definition of income to measure economic well-being. Traditionally, in welfare analysis the money income of a household is treated as a proxy for its level of welfare on the grounds that income is the means to achieve welfare. Defined in this way, income represents the value of consumption that can be undertaken. However, it may be observed that household activities contribute to household consumption by combining market goods and labour time of household members, as input to a household production process, into household commodities as output. The evaluation of the ‘value added’ to household consumption through domestic activities and the extent to which broadening the definition of income may affect the distribution of welfare was the object of Chapter 3. For this purpose, we pointed out that the fact that households differ in terms of their size, composition and other demographic characteristics implies that if we wish to compare the welfare level of two households it is not sufficient simply to compare their income levels. For example, families with children need more income than families without children to achieve the same living standard. The question is: How much more income?
