Measuring the Cost of Children

Abstract

A key element of government income support policies is the setting of payments to reflect the variations in needs of families of different compositions. This report examines several methods for using household expenditure data to estimate the needs of families with children compared to those without (the costs of children). Data from the 1988-89 Household Expenditure Survey conducted by the Australian Bureau of Statistics are used to estimate these relative costs using the identifying assumptions of the Engel, ELES and Adult Goods models. It is concluded that the Adult Goods or generalised translation model has the greatest theoretical validity, though it also has substantial data requirements. Suggestions are made for further research and data collection strategies.