Measuring the poverty lines for urban households in China—an equivalence scale method

Laid-off employees in the state-owned enterprises (SOEs) due to China's economic reform and the enterprise-restructuring plan created newly urban poverty, lending urgency to the task of constructing accurate measures of poverty thresholds. Along this line, a fundamental question is: given the widely used poverty threshold for an individual, how should that threshold vary across households with different demographic characteristics? Equivalence scales, which can be used to derive comparable poverty lines for households of different sizes and compositions and in different regions, are ideally suited for providing answers to this question. Accordingly, this paper uses the Urban Household Survey (UHS) data of China to estimate the equivalence scales for Chinese urban households. The results provide a quantitative reference to calculate the comparable poverty lines for households with different demographic compositions. A useful byproduct of this study is a specification of the demand system of China.