Description: Department Seminar

Location: 368A Heady Hall

Contact Person: Juan Carlos Cordoba

Title: Welfare Assessments with Heterogeneous Individuals

Abstract: This paper introduces a novel decomposition of welfare assessments for general dynamic stochastic economies with heterogeneous individuals. The decomposition is based on constructing individual, dynamic, and stochastic weights that characterize how welfarist planners make tradeoffs across individuals, dates, and histories. Guided by the compensation principle, it initially decomposes a welfare assessment into an efficiency and a redistribution component, while the efficiency component is further decomposed into i) aggregate efficiency, ii) risk-sharing, and iii) intertemporal-sharing components. Five minimal examples and three applications illustrate the properties of the decomposition and how it can be used to draw normative conclusions in specific scenarios.