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IPS102 Peter V. et al.
focuses on households, under the assumption that income is pooled and
shared within the household, and that certain types of goods and services
(mainly housing and food) are consumed collectively by the household,
benefiting from economies of scale. Only private households are taken
into account as these are assumed to have autonomy of decision in
economic matters, whereas this is often not the case for institutional
households (e.g., people living in prison, nursing homes or boarding
schools). To adjust for differences in consumption needs for households
of different size and composition, the project looks at so-called equivalized
results. As the needs of a household increase with each additional
household member, although not in a proportional way (due to economies
of scale), equivalence scales assign a value to each household member in
proportion to its needs, which leads to a number of consumption units for
1
each household . Household income and consumption are divided by this
number of consumption units to arrive at comparable measures across
households, i.e., equivalized income and consumption results.
8. The income measure used to analyse income inequality is household
adjusted disposable income as defined in the 2008 SNA. This concerns the
income of a household after re-distribution, mainly as a result of
government policy, including social transfers in kind. Although the latter
item is often excluded from micro distributional analyses, these in-kind
transfers can be regarded as a direct alternative to providing households
with a cash benefit to purchase the associated goods and services
themselves. Their inclusion in income distribution analysis thus leads to a
more comprehensive assessment of income inequality and of the impact
of re-distributional policies. It also leads to an increased international
comparability, because the way in which education and health, the most
important components of social transfers in kind, are organised can differ
significantly across countries. Consumption inequality is measured on the
basis of actual final consumption, as defined in the 2008 SNA, so also
including the consumption of goods and services provided in kind by
government. As the work of the EG DNA concerns both household income
and consumption expenditure, it also provides estimates on the saving of
the various household groups.
9. The methodology for compiling distributional results uses a step-by-
step approach combining data from national accounts with micro data.
Figure 1 on the next page provides a schematic overview of this approach.
In the first step, national accounts totals for the household sector, either

1 In the EGDNA project, the Oxford-modified equivalence scale has been chosen as reference
method. Accordingly, the first adult counts as 1.0 consumption unit, any additional persons
aged 14 and over count as 0.5, while all children under 14 count as 0.3.
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