Household Economies of Scale and Changes In the Distribution of Income

A bstract A household's position in the distribution of income depends not only on the household's disposable income but aldo on the degree to which economies of scale in operating a bousehold exist Since the magnitude of these 'scale effects'has never been definitively measured, three sets of assumptions about equivalent household sizes are used to construct three income distributions for 1980 and 1986 Fconomies of scale in operating a household are assumed to be strong, weak, and non existent In given vear, as these scale effects are reduced, the size of the middle segment declines It is also observed that over time, with each set of assumptions, the size of the middle segment declines Moreover, the sizes of the households found in each tail of the distribution are very sensitive to the assumption relating to economies of scale in operating a household