Measuring Welfare in Dynamic Models with Externalities: Towards Money Metrics Measures
2006 (English)Report (Other academic)
This paper is concerned with welfare measurement in multisector dynamic general equilibrium models with externalities. We start with the utility metric theory under di¤erent settings, and then transfer them into money metric measures. With ideal accounting prices for all externalities, we show that a money measure of dynamic welfare should encompass both the comprehenstive NNP and consumer surpluses. Under externalities, a forward-looking term re.ecting the present value of the future externalities has to be taken into account. For a local-in-time welfare comparison, we show that growth in conventionally measured NNP would work, provided that an externality-adjusted genuine rate of return is positive.
Place, publisher, year, edition, pages
2006. , 18 p.
Growth, welfare, externalities, and money metrics [JEL: D61; D91; Q01]
Research subject Economics
IdentifiersURN: urn:nbn:se:umu:diva-26827OAI: oai:DiVA.org:umu-26827DiVA: diva2:274255