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Aggregate Deadweight Loss and Money Metric Social Welfare

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  • Slesnick, Daniel T

Abstract

An econometric approach to the measurement of aggregate deadweight loss is proposed that does not require restrictive assumptions about preferences for validity. The measure can be interpreted as the loss in allocative efficiency and is independent of the distribution of individual welfare. An approach that is pervasive in the literature is to sum the individual measures of deadweight loss and interpret the resulting index as a measure of social welfare. The author shows that this approach is invalid unless individual preferences or the social ordering are severely restricted. An alternative method of evaluating money metric social welfare that does not require these restrictions is presented. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Slesnick, Daniel T, 1991. "Aggregate Deadweight Loss and Money Metric Social Welfare," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 123-146, February.
    • Handle: RePEc:ier:iecrev:v:32:y:1991:i:1:p:123-46
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    Cited by:

    1. 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.
    2. Marc Fleurbaey, 2009. "Beyond GDP: The Quest for a Measure of Social Welfare," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1029-1075, December.
    3. Marc Fleurbaey, 2011. "Willingness-to-pay and the equivalence approach," Revue d'économie politique, Dalloz, vol. 121(1), pages 35-58.
    4. Max Franks & Ottmar Edenhofer, 2020. "Optimal Redistributive Wealth Taxation When Wealth Is More Than Just Capital," CESifo Working Paper Series 8093, CESifo.
    5. Marc Fleurbaey & Guillaume Gaulier, 2009. "International Comparisons of Living Standards by Equivalent Incomes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 597-624, September.
    6. Aditi Dimri & François Maniquet, 2020. "Income poverty measurement in India: defining group-specific poverty lines or taking preferences into account?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(2), pages 137-156, June.
    7. Seung-Rae Kim, 2002. "Environmental Taxes and Economic Welfare: The Welfare Cost of Gasoline Taxation in the U.S. 1959-1999," Public Economics 0201003, University Library of Munich, Germany, revised 11 May 2004.

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