Relative price shifts, economies of scale and poverty during economic transition

Jean O. Lanjouw*, Peter Lanjouw, Branko Milanovic, Stefano Paternostro

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Economic transition is associated with significant shifts in relative prices between private and public goods. If, as a result, public goods claim a larger share of total expenditures, economies of scale in consumption increase. We show how relative price changes might alter the welfare of different-sized households in the short run and over time. We illustrate, for a selection of transition economies, that conventional poverty profiles are quite sensitive to assumptions made about economies of scale in consumption. In particular, the common view that large households with many children are poor relative to small households (such as those comprising the elderly) is shown to be highly non-robust.

Original languageEnglish
Pages (from-to)509-536
Number of pages28
JournalEconomics of Transition
Volume12
Issue number3
DOIs
Publication statusPublished - 2004

Keywords

  • Poverty
  • Public goods
  • Transition economies

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