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An Exact Measure of Welfare Change

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  • Earl L. Grinols
  • Kar-yiu Wong

Abstract

This paper develops a measure of the change in welfare of a household or an economy due to exogenous shocks or policy changes. The measure can be applied in a wide range of economies of scale, imperfectly competitive markets, unemployment, and domestic distortionary taxes. The welfare change measure is decomposed into five terms, which identify the five sources of welfare impacts: tax revenue, international transfer and borrowing, terms of trade, consumption substitution, and production substitution. The measure is simple to interpret and easy to apply in practice. All statistical data and information required to compute these terms are generally available or can be estimated easily.

Suggested Citation

  • Earl L. Grinols & Kar-yiu Wong, 1991. "An Exact Measure of Welfare Change," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 428-449, May.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:2:p:428-49
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    Citations

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    Cited by:

    1. Carsten Kowalczyk & Raymond Riezman, 2013. "Free trade: what are the terms-of-trade effects?," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 10, pages 149-164, World Scientific Publishing Co. Pte. Ltd..
    2. Hideo Konishi & Carsten Kowalczyk & Tomas Sjostrom, 2003. "Free Trade, Customs Unions, and Transfers," Boston College Working Papers in Economics 568, Boston College Department of Economics.
    3. Carsten Kowalczyk & Raymond Riezman, 2013. "Trade Agreements," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 13, pages 367-388, Palgrave Macmillan.
    4. Fujiwara, Kenji, 2008. "A decomposition of gains from trade in a differentiated oligopoly," Japan and the World Economy, Elsevier, vol. 20(3), pages 326-337, August.
    5. Earl Grinols & Peri Silva, 2011. "Rules of origin and gains from trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 159-173, May.
    6. Chui Ying Lee & Shinji Kaneko & Yuichiro Yoshida & Sun Hangcheng & Masaru Ichihashi & Katsufumi Fukuda, 2021. "Equivalence Gain of the Global Financial Crisis: A Note," Arthaniti: Journal of Economic Theory and Practice, , vol. 20(1), pages 111-121, June.
    7. Earl L. Grinols & Peri Silva, 2008. "Industrial targeting in free trade areas with policy independence," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 796-816, August.
    8. Davide Sala, 2007. "RTAs Formation and Trade Policy," Economics Working Papers ECO2007/59, European University Institute.
    9. A. A. Alikhanov & V. Yu. Skryabina & E. V. Tarasyuk, 0. "Liberalization Trade Relationship Between The Countries: Assessment And Consequences," International Trade and Trade Policy, ФГБОУ ВО "Ð Ð¾Ñ Ñ Ð¸Ð¹Ñ ÐºÐ¸Ð¹ Ñ ÐºÐ¾Ð½Ð¾Ð¼Ð¸Ñ‡ÐµÑ ÐºÐ¸Ð¹ ÑƒÐ½Ð¸Ð²ÐµÑ€Ñ Ð¸Ñ‚ÐµÑ‚ им. Г.Ð’. Плеханова", issue 3.
    10. Katsufumi Fukuda, 2019. "Estimation of Welfare Change due to the Trade Environment Change in China after Joining the World Trade Organization in 2001," Review of Economics and Institutions, Università di Perugia, vol. 10(2).
    11. Deergha Raj Adhikari, 2009. "Evaluating NAFTA - an impulse function approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 353-357.
    12. Avijit Mandal, 2019. "Welfare Effect of Free Trade Agreements: A Theoretical Note," Foreign Trade Review, , vol. 54(2), pages 115-125, May.
    13. Gabrielyan, Georgi T., 2017. "Economics of Import Duty and Excise Tax Drawback," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258026, Agricultural and Applied Economics Association.

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