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Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US

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Author Info

  • Bargain, Olivier

    ()
    (University of Aix-Marseille II)

  • Decoster, André

    ()
    (K.U.Leuven)

  • Dolls, Mathias

    ()
    (ZEW Mannheim)

  • Neumann, Dirk

    ()
    (Université catholique de Louvain)

  • Peichl, Andreas

    ()
    (ZEW Mannheim)

  • Siegloch, Sebastian

    ()
    (University of Mannheim)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6102.

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Length: 42 pages
Date of creation: Nov 2011
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Handle: RePEc:iza:izadps:dp6102

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Keywords: preference heterogeneity; Beyond GDP; welfare measures; labor supply;

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Citations

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Cited by:
  1. 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, Springer, vol. 41(4), pages 789-817, October.
  2. Sutherland, Holly & Figari, Francesco, 2013. "EUROMOD: The European Union Tax-Benefit Microsimulation Model," EUROMOD Working Papers EM8/13, EUROMOD at the Institute for Social and Economic Research.
  3. Haan, Peter & Decoster, Andre, 2013. "Empirical welfare analysis with preference heterogeneity," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79815, Verein für Socialpolitik / German Economic Association.
  4. 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, CEPR;CES;MSH, vol. 28(75), pages 375-422, 07.
  5. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2013. "Distributional benchmarking in tax policy evaluations," Discussion Papers, Research Department of Statistics Norway 765, Research Department of Statistics Norway.
  6. Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Comparing Inequality Aversion across Countries When Labor Supply Responses Differ," Working Papers, HAL halshs-00805751, HAL.
  7. John E. Roemer & Alain Trannoy, 2014. "Equality of Opportunity," Levine's Working Paper Archive, David K. Levine 786969000000000914, David K. Levine.

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