Consumer's Surplus versus Compensating Variation Revisited

Consumer's surplus and a second-order approximation to compensating variation are compared to the exact compensating variation for a subsystem of several commodities. An empirical application to the relative retail price distortions created by the U.S. dairy program is presented. In the application, a new specification for weakly integrable incomplete demand models is developed and estimated. The integrable demand model has sufficient flexibility that it is not rejected by the data. Both welfare approximations are found to introduce large errors in the measurement of deadweight losses.


Issue Date:
Aug 04 1991
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/271258
Language:
English
Total Pages:
20




 Record created 2018-04-12, last modified 2020-10-28

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