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Behavior, Robustness, and Sufficient Statistics in Welfare Measurement

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  • Richard E. Just

    () (Department of Agricultural and Resource Economics, University of Maryland, College Park, Maryland 20742)

Abstract

The joint implications for welfare measurement of three recent literatures are considered: the behavioral welfare economics literature, the structural versus reduced form debate in econometrics, and the use of sufficient statistics for characterizing behavior. The first permits the revealed preference paradigm to include a wide variety of so-called anomalous behavioral criteria. Sufficient statistics permit aggregation under heterogeneous behavioral criteria, not only heterogeneous characteristics, to facilitate meaningful economic welfare analysis. Atheoretic reduced form econometrics and traditional treatment-effect econometrics do not support welfare analysis, but marginal treatment-effect econometrics is useful for a certain type of policy problems. More generally, estimation of sufficient statistics requires theory-based reduced form econometrics. Sufficient statistics are further suggested for general equilibrium welfare measurement. Under certain assumptions about endogenous government behavior, robust concepts of economic welfare measurement emerge that rationalize the terminology and concepts of traditional welfare economics, although with a much broader conceptual basis.

Suggested Citation

  • Richard E. Just, 2011. "Behavior, Robustness, and Sufficient Statistics in Welfare Measurement," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 37-70, October.
  • Handle: RePEc:anr:reseco:v:3:y:2011:p:37-70
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-040709-135125
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    1. repec:spr:jecfin:v:41:y:2017:i:3:d:10.1007_s12197-016-9360-z is not listed on IDEAS

    More about this item

    Keywords

    behavioral welfare; general equilibrium; reduced form econometrics; structural econometrics;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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