Potential welfare and the sum of individual compensating or equivalent variations

DOI10.1016/0022-0531(87)90004-4MaRDI QIDQ1819683zbMATH OpenOpenAlexFDO

Authors Javier Ruiz-Castillo

Publication date 1987

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL http://hdl.handle.net/10016/4771

zbMATH Keywords

National Income Testpotential welfare

Mathematics Subject Classification ID

Individual preferences (91B08) Statistical methods; economic indices and measures (91B82)

Review text

We investigate under which conditions the sign of the sum of both the individual compensating and equivalent variations correctly indicates changes in potential welfare. Our results reproduce exactly those of \textit{J. S. Chipman} and \textit{J. C. Moore} [Econometrica 48, 401-422 (1980)] for the National Income Test, which did not rely on individual measures of welfare directly related to consumers' preferences: (i) a necessary and sufficient condition for the new test to be valid is that individual preferences are identical and homothetic; and (ii) if the distribution of income is constant and preferences are homothetic, then the new test is valid only if preferences are also identical.

Recommendations

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Cites work

• Aggregate Demand, Real National Income, and the Compensation Principle
• scientific article; zbMATH DE number 3436880 (Why is no real title available?)
• On social welfare functions and the aggregation of preferences
• Real National Income with Homothetic Preferences and a Fixed Distribution of Income

Cited in

(5)

• On the relationship between the Hicksian measures of change in welfare and the Pareto principle
• Welfare variations and the comparative statics of demand
• scientific article; zbMATH DE number 4200007 (Why is no real title available?)
• A RULE FOR AGGREGATING INDIVIDUAL WELFARE MEASURES
• The Compensation Principle and the National Income Test

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