Measuring Consumer Surplus with Unknown Hicksian Demands
AbstractThe objective of this paper to introduce the Slutsky demand curve as a tool in welfare analysis. It is shown that the compensating or equivalent variation can in most cases be measured to within a fraction of a percent of their true value without any numerical integration techniques. Two well known examples in the literature are explored. A theoretical measure of the accuracy of the Slutsky based measure, relative to the Marshallian measure, is developed. The approach is locally path independent and can be used to measure the money value of a ration. Finally it application to models of labour supply is explored an an error in the literature is corrected.
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Bibliographic InfoPaper provided by University of Sydney, School of Economics in its series Working Papers with number 219.
Date of creation: Jun 1995
Date of revision:
Other versions of this item:
- Irvine, Ian J & Sims, William A, 1998. "Measuring Consumer Surplus with Unknown Hicksian Demands," American Economic Review, American Economic Association, vol. 88(1), pages 314-22, March.
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- Bockstael, Nancy E. & Freeman III, A. Myrick, 2006. "Welfare Theory and Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 12, pages 517-570 Elsevier.
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- Miroslav Svoboda, 2008. "History and troubles of consumer surplus," Prague Economic Papers, University of Economics, Prague, vol. 2008(3), pages 230-242.
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