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Estimating the distribution of welfare effects using quantiles

Hoderlein, Stefan and Vanhems, Anne (2018) Estimating the distribution of welfare effects using quantiles. Journal of Applied Econometrics, 33 (1). pp. 52-72.

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This paper proposes a framework to model welfare effects that are associated with a price change in a population of heterogeneous consumers. The framework is similar to that of Hausman and Newey (Econometrica, 1995, 63, 1445–1476), but allows for more general forms of heterogeneity. Individual demands are characterized by a general model that is nonparametric in the regressors, as well as monotonic in unobserved heterogeneity, allowing us to identify the distribution of welfare effects. We first argue why a decision maker should care about this distribution. Then we establish constructive identification, propose a sample counterparts estimator, and analyze its large-sample properties. Finally, we apply all concepts to measuring the heterogeneous effect of a change of gasoline price using US consumer data and find very substantial differences in individual effects across quantiles.

Item Type: Article
Language: English
Date: February 2018
Refereed: Yes
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 30 Apr 2018 16:02
Last Modified: 30 Apr 2018 16:02
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