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Empirical welfare economics

Author

Listed:
  • Chambers, Christopher P.

    (Department of Economics, Georgetown University)

  • Echenique, Federico

    (Deparatment of Economics, University of California Berkeley)

Abstract

Welfare economics relies on access to agents' utility functions: we revisit classical questions in welfare economics, assuming access to data on agents' past choices instead of their utilities. Our main result considers the existence of utilities that render a given allocation Pareto optimal. We show that a candidate allocation is efficient for some utilities consistent with the choice data if and only if it is efficient for an incomplete relation derived from the revealed preference relations and convexity. Similar ideas are used to make counterfactual choices for a single consumer, policy comparisons by the Kaldor criterion, and offer bounds on the degree of inefficiency in a Pareto suboptimal allocation.

Suggested Citation

  • Chambers, Christopher P. & Echenique, Federico, 0. "Empirical welfare economics," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5845
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    References listed on IDEAS

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    More about this item

    Keywords

    Revealed preference theory; welfare economic; general equilibrium;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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