Measuring Welfare and Inequality with Incomplete Price Information / David Atkin, Benjamin Faber, Thibault Fally, Marco Gonzalez-Navarro.

Format:

Book

Author/Creator:

Atkin, David.

Contributor:

National Bureau of Economic Research.

Faber, Benjamin.

Fally, Thibault.

Gonzalez-Navarro, Marco.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26890.

NBER working paper series no. w26890

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We propose and implement a new approach that allows us to estimate income-specific changes in household welfare in contexts where well-measured prices are not available for important subsets of consumption. Using rich but widely available expenditure survey microdata, we show that we can recover income-specific equivalent and compensating variations as long as preferences fall within the broad quasi-separable class (Gorman 1970; 1976). Our approach is flexible enough to allow for non-parametric estimation at each point of the income distribution. We implement this approach to estimate inflation and welfare changes in rural India between 1987 and 2000, and to revisit the impacts of India's trade reforms. Our estimates reveal that lower rates of inflation for the rich erased the real income convergence documented by the existing literature that uses the subset of consumption with well-measured prices to calculate inflation.

Notes:

Print version record

March 2020.