Does size matter? Implications of household size for economic growth and convergence
| DOI | http://doi.org/10.1111/sjpe.12188 |
| Published date | 01 September 2018 |
| Author | Vadim Kufenko,Vincent Geloso,Klaus Prettner |
| Date | 01 September 2018 |
DOES SIZE MATTER? IMPLICATIONS
OF HOUSEHOLD SIZE FOR ECONOMIC
GROWTH AND CONVERGENCE
Vadim Kufenko*, Vincent Geloso** and Klaus Prettner*
ABSTRACT
We assess the effects of changes in household size on the long-run evolution of
living standards and on cross-country convergence. When the observed changes
in average household size across countries are taken into consideration, growth
in living standards is slower throughout the 20th century as compared to a mea-
sure based on per capita GDP. Furthermore, the speed of divergence between
different countries before 1950 is faster and the speed of convergence after 1950
is slower after adjusting for the evolution in household size.
II
NTRODUCTION
If average household size changes over time, there are obvious implications
for the long-run evolution of living standards and for cross-country conver-
gence. Large households generate economies of scale (Deaton and Paxson,
1998; Ravaillon, 2016) such that measuring the well-being of a large house-
hold in terms of income per member leads to a downward bias as compared
to smaller households with the same income per member. Since rich countries
tend to have smaller households than poorer countries (Bradbury et al.,
2014), a similar effect distorts the measure of cross-country dispersion in liv-
ing standards. Studies on the evolution of inequality have incorporated these
insights into their theoretical models and empirical analyzes. An example is
the article of Burkhauser et al. (2012), who show that middle-class income
per tax unit increased by less than middle class income measured per house-
hold over the past decades or when adjusting for the changing size of the
sharing unit over time. However, the macroeconomic literature has not yet
taken a full account of the size-related heterogeneity of households. Rather,
it has conserved a focus on per capita GDP which may not adequately
reflect the actual evolution of living standards within countries (economic
growth) and the actual dispersion in living standards across countries (con-
vergence).
*University of Hohenheim, Institute of Economics
**Bates College, Department of Economics
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12188, Vol. 65, No. 4, September 2018
©2018 Scottish Economic Society.
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