Income Distribution in Slovakia: Sensitivity Analysis of Income Distribution to the Choice of Equivalence Scales

The paper shows how the income distribution and various measures of income inequality are affected by the choice of the equivalence scale. Income distribution and inequality studies use an equivalence scale to adjust raw income to account for the cost of maintaining households and families. These costs are said to vary with household size and composition, and sometimes the number of employed in the household and other household characteristics. The choice of the equivalence scale can be advantageous for certain social groups, while disadvantageous for others. The aim of this paper is to review the most common equivalence scales used and compare them with the official equivalence scale applied by Eurostat since 1994, called OECD scale. According to the results we could say, that choice of the equivalence scales affect income distribution as well as inequality measures.