Separability, partial demand systems, and consumer's surplus measures

Michael Hanemann, Edward Morey

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

In practice, complete demand systems are not estimated. Rather, either an incomplete demand system is estimated, or separability is invoked and a partial demand system is estimated. This paper considers the relationship between the conventional compensating variation (equivalent variation) and the corresponding welfare measure that can be derived from a partial demand system and the current budget allocation to the separable group. Even assuming the separability assumption invoked is appropriate, these partial measures provide, in general, only a limited amount of information about the compensating variation and no information about the equivalent variation. Great care is therefore needed when using partial welfare measures to evaluate policy.

Original languageEnglish (US)
Pages (from-to)241-258
Number of pages18
JournalJournal of Environmental Economics and Management
Volume22
Issue number3
DOIs
StatePublished - May 1992
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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