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Aggregate Deadweight Loss and Money Metric Social Welfare

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  • Slesnick, Daniel T

Abstract

An econometric approach to the measurement of aggregate deadweight loss is proposed that does not require restrictive assumptions about preferences for validity. The measure can be interpreted as the loss in allocative efficiency and is independent of the distribution of individual welfare. An approach that is pervasive in the literature is to sum the individual measures of deadweight loss and interpret the resulting index as a measure of social welfare. The author shows that this approach is invalid unless individual preferences or the social ordering are severely restricted. An alternative method of evaluating money metric social welfare that does not require these restrictions is presented. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Slesnick, Daniel T, 1991. "Aggregate Deadweight Loss and Money Metric Social Welfare," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 123-146, February.
  • Handle: RePEc:ier:iecrev:v:32:y:1991:i:1:p:123-46
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    Cited by:

    1. M. Fleurbaey., 2012. "Beyond GDP: The Quest for a Measure of Social Welfare," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 2.
    2. 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;The Society for Social Choice and Welfare, vol. 41(4), pages 789-817, October.
    3. Seung-Rae Kim, 2002. "Environmental Taxes and Economic Welfare: The Welfare Cost of Gasoline Taxation in the U.S. 1959-1999," Public Economics 0201003, EconWPA, revised 11 May 2004.
    4. Marc Fleurbaey & Guillaume Gaulier, 2009. "International Comparisons of Living Standards by Equivalent Incomes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 597-624, September.
    5. Marc Fleurbaey, "undated". "Willingness-to-pay and the Equivalent Approach," OPHI Working Papers ophiwp025, Queen Elizabeth House, University of Oxford.

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