This paper illustrates how computable general equilibrium models can be used to evaluate the limits of partial equilibrium analysis. The example used for the analysis involves welfare measurement for economy-wide exogenous shocks. Comparison of Harberger's general equilibrium approximation to consumer surplus and the Marshallian partial equilibrium measures indicates that there are cases where the latter offers a reasonably accurate measure of welfare change in a general equilibrium setting.
ASJC Scopus subject areas
- Economics and Econometrics