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Money metrics welfare measures in imperfect markets under growth
Umeå University, Faculty of Social Sciences, Department of Economics.
2006 (English)Report (Other academic)
Abstract [en]

This paper shows how utility based welfare measures in dynamic general equilibrium under imperfect markets can be transferred into a money metrics. In order to do this, we need to price forward looking components measured in units of utility. The typical comprehensive quasi-static welfare measure contains a core that looks like a comprehensive (green) NNP component, as well as additional consumer surplus terms for both consumption goods and the externality. In addition, it contains a forward looking component with the discounted value of the marginal externality as the function to be integrated over time is also required. To accomplish this, we need a price index that is independent of the market basket, or to assume that the marginal utility of income is constant over time. With respect to local welfare measures it turn out that growth in traditional NNP will surprisingly work, provided that we condition on a positive average marginal rate of return of investment, and use an augmented genuine saving concept.

Place, publisher, year, edition, pages
Umeå: Umeå universitet , 2006. , 16 p.
Umeå economic studies, ISSN 0348-1018 ; 694
Keyword [en]
Welfare measurement under growth, imperfect markets, utility versus money metrics
National Category
Research subject
URN: urn:nbn:se:umu:diva-26825OAI: diva2:274249
Available from: 2009-10-27 Created: 2009-10-27 Last updated: 2015-11-11Bibliographically approved

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Löfgren, Karl-Gustaf
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Department of Economics

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