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Willingness-to-pay and the equivalence approach

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  • Marc Fleurbaey

Abstract

This paper describes the evaluation of individual situations in terms of equivalent incomes (or money-metric utilities) computed from ordinary income by adding or subtracting various terms of willingness-to-pay. It discusses the origin of the approach and its connection with social choice theory, fair allocation theory, and philosophical principles. It shows how this has been generalized into a broader ?equivalence approach?, and argues that the criticisms that have been raised against this methodology are not compelling. It also examines the challenges to be addressed for empirical applications of the approach.

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  • Marc Fleurbaey, 2011. "Willingness-to-pay and the equivalence approach," Revue d'économie politique, Dalloz, vol. 121(1), pages 35-58.
    • Handle: RePEc:cai:repdal:redp_211_0035
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    2. Nicholas Rohde & Ross Guest, 2018. "Multidimensional Inequality Across Three Developed Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 576-591, September.
    3. Harun Onder & Pierre Pestieau & Grégory Ponthière, 2019. "Equivalent income versus equivalent lifetime: does the metric matter?," PSE Working Papers halshs-02187803, HAL.
    4. Olivier Bargain & André Decoster & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(4), pages 789-817, October.
    5. John A. Weymark, 2017. "Conundrums for nonconsequentialists," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(2), pages 269-294, February.
    6. Islam, Nizamul & Colombino, Ugo, 2018. "The case for NIT+FT in Europe. An empirical optimal taxation exercise," Economic Modelling, Elsevier, vol. 75(C), pages 38-69.
    7. Canning, David, 2023. "Conducting Cost Benefit Analysis in Expected Utility Units Using Revealed Social Preferences," Working Papers 0722, University of Heidelberg, Department of Economics.
    8. Yang, Lin, 2018. "Measuring well-being: a multidimensional index integrating subjective well-being and preferences," LSE Research Online Documents on Economics 87789, London School of Economics and Political Science, LSE Library.
    9. Marc Fleurbaey, 2012. "The importance of what people care about," Politics, Philosophy & Economics, , vol. 11(4), pages 415-447, November.
    10. Alain Babatounde & Bart Capeau & Romain Houssa, 2023. "Welfare effects of indirect tax policies in West Africa," DeFiPP Working Papers 2301, University of Namur, Development Finance and Public Policies.
    11. Lin Yang, 2017. "Measuring individual well-being: A multidimensional index integrating subjective well-being and preferences," CASE Papers /202, Centre for Analysis of Social Exclusion, LSE.
    12. Yang, Lin, 2017. "Measuring individual well-being: A multidimensional index integrating subjective well-being and preferences," LSE Research Online Documents on Economics 103495, London School of Economics and Political Science, LSE Library.
    13. Crispin H. V. Cooper, 2020. "Quantitative Models of Well-Being to Inform Policy: Problems and Opportunities," Sustainability, MDPI, vol. 12(8), pages 1-13, April.
    14. Nizamul Islam & Ugo Colombino, 2018. "The case for negative income tax with flat tax in Europe. An empirical optimal taxation exercise," Working Papers 454, ECINEQ, Society for the Study of Economic Inequality.

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