Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170892
Authors: 
Akay, Alpaslan
Bargain, Olivier
Jara, Xavier
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 10908
Abstract: 
Multidimensional welfare analysis has recently been revived by money-metric measures based on explicit fairness principles and the respect of individual preferences. To operationalize this approach, preference heterogeneity can be inferred from the observation of individual choices (revealed preferences) or from self-declared satisfaction following these choices (subjective well-being). We question whether using one or the other method makes a difference for welfare analysis based on income-leisure preferences. We estimate ordinal preferences that are either consistent with actual labor supply decisions or with income- leisure satisfaction. For different ethical priors regarding work preferences, we compare the welfare rankings obtained with both methods. The correlation in welfare ranks is high in general and very high for the 60% of the population whose actual choices coincide with subjective well-being maximization. For the rest, most of the discrepancies seem to be explained by labor market constraints among the low skilled and underemployment among low-educated single mothers. Importantly from a Rawlsian perspective, the identification of the worst o¤ depends on ethical views regarding responsibility for work preferences and the extent to which actual choices are constrained on the labor market.
Subjects: 
fair allocation
money metric
decision utility
experienced utility
labor supply
subjective well-being
JEL: 
C35
C90
D60
D63
D71
H24
H31
J22
Document Type: 
Working Paper

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