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A Measure of Welfare Based on Permanent Income Hypothesis: An Application on Italian Households Budgets

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  • Riccardo Massari

    (University "La Sapienza", Rome)

Abstract

The measurement of the actual household welfare is possibly the main problem in welfare analysis. Since welfare is not directly observable, researchers have to find a proxy to measure it. The aim of this work is to find a measure of welfare based on cross-sectional data. The measure proposed is a linear combination of observable indicators. Using data from the Bank of Italy SHIW, this paper provides some evidence that, under assumptions that are not very restrictive, this measure could properly depict the actual ranking of households in terms of their economic status.

Suggested Citation

  • Riccardo Massari, 2005. "A Measure of Welfare Based on Permanent Income Hypothesis: An Application on Italian Households Budgets," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 55-92, September.
    • Handle: RePEc:gde:journl:gde_v64_n1_p55-92
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    More about this item

    Keywords

    living standard; factor analysis; kernel density; welfare measurement;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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