The nonparametric approach to applied welfare analysis

Donald J. Brown, Caterina Calsamiglia

Research output: Contribution to journalArticleResearchpeer-review

25 Citations (Scopus)

Abstract

Changes in total surplus are traditional measures of economic welfare. We propose necessary and sufficient conditions for rationalizing individual and aggregate consumer demand data with individual quasilinear and homothetic utility functions. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and sufficient conditions on input market data for efficient production, i.e. production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve. © Springer-Verlag 2007.
Original languageEnglish
Pages (from-to)183-188
JournalEconomic Theory
Volume31
DOIs
Publication statusPublished - 1 Apr 2007

Keywords

  • Afriat inequalities
  • Homothetic utilities
  • Nonmarketed goods
  • Quasilinear utilities
  • Welfare economics

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