estimates against old age poverty. As an example Deaton (1997, p. 243) cites that the “fact” that there is less poverty among the elderly in the United States depends on the assumption in the official counts that the elderly need less than adults younger than 60.

Two major issues complicate the problem of obtaining poverty rates for old age. First, the elderly may often be living in households that are not that poor even though they themselves are not receiving any pension so that the often used implicit assumption of fair sharing might be invalid.<sup>14</sup> Second, the measurement of poverty in old age needs to be sensitive to the potential impact of economies of scale in household consumption on the perceived well-being of the aged. Typically households with many children are deemed to be among the poorest if one does not adjust for economies of scale. Then pensioner households or households headed by widows, etc are not very highly represented among the poor.<sup>15</sup> To illustrate the importance of equivalence scales,

> 14 Traditionally equal sharing is assumed, with possibly a downward adjustment for children. Yet there is ample evidence to suggest that this is not the case. In the real world, we observe a wide range of situations ranging from the idyllic image of a family all devoted to the care of its elderly members to the more depressing representation of elderly being kept in the closet. The later situation has recently received a lot of attention in India where widows who represent a large fraction of the elderly (55% of women aged 60 and above are widowed—see Jensen 2003) and often do not receive an equal share within the household (Dreze and Srinavasan 1997). There is also the case of the Tanzanian “witches” studied by Miguel (2003) who shows how harshly unproductive members of a family can be treated by the others.

15 Economies of scale resulting from living together and sharing goods such as housing, means of transportation, etc vary across countries, years and income levels. The extent of scale economies depend on the allocation between private and public goods in the household’s consumption basket, an allocation which is endogenous depending on prices and income. Household size, age and gender of household members may also influence the amount of resources needed to attain a certain level of well-being. The consumption needs of children are usually thought as being quite lower than that of adults. To go from household’s resources to individual well-being, the concept of equivalent household scale is used. For example, the OECD currently uses an equivalence scale equal to 0.5 + 0.5 * (number of adults) + 0.3 * (number of children). A household consisting of two adults and three children would need to spend 2.4 times as much as a single adult to be equally as well off as a single adult. By contrast, in the absence of economies of scale and with the same needs for both children and adults, this family would need 5 time as much as a single adult to reach the same welfare. An alternative equivalence scale formula is simply to take the square root of the family size (which, in our example, would give an equivalent size of 2.2, i.e., close to that of the OECD). Lanjouw, Milanovic and Paternostro (1998) examine the incidence of scale economies on the poverty rate of the elderly in selected transition economies. They show that, without scale economies, poverty in old age is relatively low but that it increases with scale economies and rapidly become more important than in younger age groups.

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