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Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US

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  • Bargain, Olivier
  • Decoster, André
  • Dolls, Mathias
  • Neumann, Dirk
  • Peichl, Andreas
  • Siegloch, Sebastian

Abstract

Following the report of the Stiglitz Commission, measuring and comparing well-being across countries has gained renewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most often rely on the assumption of identical preferences to avoid the difficulties related to interpersonal comparisons. In this paper, we suggest an international comparison based on individual welfare rankings that fully retain preference heterogeneity. Focusing on the consumption-leisure trade-off, we estimate discrete choice labor supply models using harmonized microdata for 11 European countries and the US. We retrieve preference heterogeneity within and across countries and analyze several welfare criteria which take into account that differences in income are partly due to differences in tastes. The resulting welfare rankings clearly depend on the normative treatment of preference heterogeneity with alternative metrics. We show that these differences can indeed be explained by estimated preference heterogeneity across countries rather than demographic composition

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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number EM5/11.

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Date of creation: 21 Dec 2011
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Publication status: published
Handle: RePEc:ese:emodwp:em5-11

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Citations

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Cited by:
  1. Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Comparing Inequality Aversion across Countries When Labor Supply Responses Differ," AMSE Working Papers 1323, Aix-Marseille School of Economics, Marseille, France.
  2. Haan, Peter & Decoster, Andre, 2013. "Empirical welfare analysis with preference heterogeneity," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79815, Verein für Socialpolitik / German Economic Association.
  3. Olivier Bargain & André Decoster & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US," Social Choice and Welfare, Springer, vol. 41(4), pages 789-817, October.
  4. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, Interational Microsimulation Association, vol. 1(6), pages 4-26.
  5. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2013. "Distributional benchmarking in tax policy evaluations," Discussion Papers 765, Research Department of Statistics Norway.
  6. Olivier Bargain & Mathias Dolls & Clemens Fuest & Dirk Neumann & Andreas Peichl & Nico Pestel & Sebastian Siegloch, 2013. "Fiscal union in Europe? Redistributive and stabilizing effects of a European tax-benefit system and fiscal equalization mechanism," Economic Policy, CEPR & CES & MSH, vol. 28(75), pages 375-422, 07.
  7. John E. Roemer & Alain Trannoy, 2014. "Equality of Opportunity," Levine's Working Paper Archive 786969000000000914, David K. Levine.

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