In the early 1990s, PSI asked David Betson of the University of Notre Dame to revise the Income Shares methodology. He also used an income equivalence approach, borrowing a technique from Erwin Rothbarth. The Rothbarth methodology compares changes in levels of household spending on purely adult goods to determine child costs. The idea is that looking at pure adult goods reduces the problem of shifts between adult and shared goods after having a child or an additional child. For measuring child costs, Betson specifically uses a particular bundle of adult goods to measure a household's level of well being-this bundle being adult clothing, alcohol, and tobacco. In other words, he replaced the food-only indirect measure with spending in three adult-only areas and switched from shares of consumption to levels of consumption. Because the cost tables are based on a Betson version of Rothbarth's earlier research, they are sometimes referred to as Betson-Rothbarth tables.This is wacky. I haven't found Betson's paper yet, so I don't know how it works exactly. But apparently the analysis isn't based on any child expense data at all. The idea seems to be that if a couple with no kids spends twice as much on adult clothing, alcohol, and tobacco as a couple with one kid, then a couple with one kid should spend half their money on the kid.
There are too many things wrong with this approach to list right now.