Blackorby, Charles Laisney, François Schmachtenberg, Rolf
Year of Publication:
ZEW Discussion Papers 91-04
A number of studies have evaluated the social welfare impact of price and income changes using equivalent incomes that are computed at some reference price vector, and an aggregator with these equivalent incomes as arguments in place of a social welfare function. This paper investigates the impact of the choice of the reference price vector on the results of such exercises, distinguishing the case of individualized prices from the constrained case where all individuals face the same price vector. We characterize preferences and aggregators leading to reference-price-independent welfare prescriptions.