Characterizing Pareto Improvements in an Interdependent Demand System
Journal of Public Economic TheoryPublished 5 July 2004
Peter Kooreman, Lambert Schoonbeek
Citations12
SJR quartileQ2
SJR score0.62
SNIP1.09
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Abstract
Abstract Interdependent preferences generally imply Pareto inefficiency. For a general demand system, we provide a characterization of Pareto improvements. For a prominent parametric specification, the Linear Expenditure System, we characterize in detail the welfare loss associated with interdependent preferences. Using an estimated empirical model of this kind, we calculate the compensating variation corresponding to the welfare loss.
Keywords
Social SciencesEconomics, Econometrics and Finance
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