Empirical welfare analysis with hedonic budget constraints

Bhattacharya, Debopam, Oparina, Ekaterina ORCID: 0000-0002-1544-8751 and Xu, Qianya (2024) Empirical welfare analysis with hedonic budget constraints. CEP Discussion Papers (CEPDP2050). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

Text - Published Version Download (580kB)

• https://cep.lse.ac.uk/_new/publications/...

Abstract

We analyze demand settings where heterogeneous consumers maximize utility for product attributes subject to a nonlinear budget constraint. We develop nonparametric methods for welfare-analysis of interventions that change the constraint. Two new findings are Roy's identity for smooth, nonlinear budgets, which yields a Partial Differential Equation system, and a Slutsky-like symmetry condition for demand. Under scalar unobserved heterogeneity and single-crossing preferences, the coefficient functions in the PDEs are nonparametrically identified, and under symmetry, lead to path-independent, money-metric welfare. We illustrate our methods with welfare evaluation of a hypothetical change in relationship between property rent and neighborhood school-quality using British microdata.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods I - Health, Education, and Welfare > I3 - Welfare and Poverty > I30 - General H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Date Deposited:	13 Feb 2025 16:15
Last Modified:	13 Feb 2025 16:15
URI:	http://eprints.lse.ac.uk/id/eprint/126792

Actions (login required)

View Item