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The estimation of welfare levels of a cardinal utility function

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  • Buyze, Jeannine

Abstract

In order to measure an individual's welfare function of income, WFI [Van Praag (1968, 1971)], the individual is confronted with various welfare levels and asked to associate income levels with them. The welfare levels are given as verbal qualifications like ‘good’, ‘sufficient’, ‘bad’, etc. It is assumed that these verbal qualifications correspond to intervals of equal length of the range of the WFI. Here we want to test this assumption. A first principal component model is applied. The intervals of the range of the WFI associated with the verbal qualifications are estimated and a test of their equality is performed.

Suggested Citation

  • Buyze, Jeannine, 1982. "The estimation of welfare levels of a cardinal utility function," European Economic Review, Elsevier, vol. 17(3), pages 325-332.
  • Handle: RePEc:eee:eecrev:v:17:y:1982:i:3:p:325-332
    DOI: 10.1016/S0014-2921(82)80067-6
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    References listed on IDEAS

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    1. Kapteyn, Arie & Wansbeek, Tom & Buyze, Jeannine, 1979. "Maximizing or Satisficing?," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 549-563, November.
    2. Kapteyn, Arie & Wansbeek, Tom & Buyze, Jeannine, 1980. "The dynamics of preference formation," Journal of Economic Behavior & Organization, Elsevier, vol. 1(2), pages 123-157, June.
    3. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
    4. repec:dau:papers:123456789/13005 is not listed on IDEAS
    5. Kapteyn, Arie & Van Herwaarden, Floor G., 1980. "Interdependent welfare functions and optimal income distribution," Journal of Public Economics, Elsevier, vol. 14(3), pages 375-397, December.
    6. Laffargue, Jean-Pierre, 1977. "Nonlinear models of analysis of variance," Journal of Econometrics, Elsevier, vol. 5(3), pages 347-363, May.
    7. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
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    Cited by:

    1. Ranney, Christine K. & Kushman, John E., 1987. "A Study of the Interdependent Food Stamp Program Participation and Food Demand Decisions," Research Reports 251940, University of California, Davis, Giannini Foundation.
    2. Amiel, Yoram, 1998. "The subjective approach to the measurement of income inequality," LSE Research Online Documents on Economics 6595, London School of Economics and Political Science, LSE Library.
    3. Dagsvik, John K. & Strom, Steinar & Jia, Zhiyang, 2006. "Utility of income as a random function: Behavioral characterization and empirical evidence," Mathematical Social Sciences, Elsevier, vol. 51(1), pages 23-57, January.
    4. Yoram Amiel, 1998. "The Subjective Approach to the Measurement of Income Inequality (published in Handbook of Income Inequality Measurement, J Silber (ed), Kluwer Academic Publishers (1999), pp.227-241)," STICERD - Distributional Analysis Research Programme Papers 38, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    5. Wim Groot & Henriëtte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872.
    6. Groot, Wim & Maassen van den Brink, Henriette & Plug, Erik, 2002. "Money for Health: The Compensating Variation of Cardiovascular Diseases," IZA Discussion Papers 653, Institute for the Study of Labor (IZA).

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