The paper gives a brief overview of the theory of equivalence scales together with an application of Engel's method to the Sri Lankan socioeconomic survey of 1969-1970. A welfare measure is given that depends on family composition and on the level of per capita expenditure. The measure corrects per capita expenditureso that it takes into account the more modest needs of children relative to adults, economies of scale in consumption, and the greater importance of relative needs and economies of scale for more well-to-do households. The ranking of households according to corrected per capita expenditure is significantly different from the ranking according to per capita itself. The correction also somewhat reduces overall measures of inequality, but the important effect is on the identification of poor households.
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