Prices and Welfare: An Introduction to the Measurement of Well-being when Prices Change
by Abdelkrim Araar (Author), Paolo Verme (Author)

About the Author
Abdelkrim Araar is Researcher at Laval University, Quebec City, Canada.
Paolo Verme is Lead Econo-mist at the World Bank, Washington D.C., USA

About this book
This book provides a general framework for the use of theoretical contributions in empirical works, addressing the question of what is the effect of a price change on household well-being. This simple question is one of the most relevant and controversial questions in microeconomic theory and one of the main sources of errors in empirical economics. In particular, this book aims to 1) Review the essential microeconomics literature since the first seminal papers by Hicks in the 1930s; 2) Organize and simplify this literature in a way that can be easily used by analysts with different backgrounds providing algebraic, geometric and computational illustrations; 3) identify and measure the essential differences across methods and test how these differences affect empirical results; 4) Provide guidelines for the use of alternative approaches under imperfect information on utility, demand systems, elasticities and more generally incomes and quantities; 5) Provide computational codes in Stata for the application of all methods. The focus of the book is on developing economies and the poor, and the assumptions made will relate primarily to these countries and group of people, presumably the main policy focus of international organizations and national governments.

Brief contents
1 Introduction 1
    References 6
2 Assumptions and Measures 9
    2.1 Assumptions 9
    2.2 Measures 11
        2.2.1 Definitions 11
        2.2.2 Geometric Interpretation 14
    References 17
3 Theory and Computation 19
    3.1 Computation 19
        3.1.1 Index Numbers 20
        3.1.2 Demand Functions 20
        3.1.3 Elasticity 23
        3.1.4 Taylor’s Approximations 25
        3.1.5 Vartia’s Approximation 38
        3.1.6 Breslaw and Smith’s Approximation 40
        3.1.7 The Ordinary Differential Equations Methods 40
        3.1.8 Relational Approach 42
    References 44
4 Empirical Applications 47
    4.1 Applications 47
        4.1.1 Individual Welfare 48
        4.1.2 Social Welfare 61
    References 73
5 Conclusion 75
Appendices 79
    A.1 Demand Systems 79
        A.1.1 Linear Demand (LD) 79
        A.1.2 Log Linear Demand (LLD) 79
        A.1.3 The Linear Expenditure System (LES) 80
        A.1.4 The Almost Ideal Demand System (AIDS) 82
        A.1.5 The Quadratic Almost Ideal Demand System (QUAIDS) 84
        A.1.6 Exact Affine Stone Index (EASI) 85
    B.1 Nonlinear Price Changes and Well-Being 87
    C.1 Stata Codes 90
    References 96
Index 97

Pages: 98 pages
Publisher: Palgrave Pivot; 1st ed. 2019 edition (September 10, 2019)
Language: English
ISBN-10: 3030174220
ISBN-13: 978-3030174224