作者
John K Dagsvik, Anders Karlström
发表日期
2005/1/1
期刊
The Review of Economic Studies
卷号
72
期号
1
页码范围
57-76
出版商
Wiley-Blackwell
简介
In this paper we discuss Hicksian demand and compensating variation in the context of discrete choice. We first derive Hicksian choice probabilities and the distribution of the (random) expenditure function in the general case when the utilities are nonlinear in income. We subsequently derive exact and simple formulae for the expenditure and choice probabilities under price (policy) changes conditional on the initial utility level. This is of particular interest for welfare measurement because it enables the researcher to compute the distribution of compensating variation in a simple way. We also derive formulae for the joint distribution of expenditure, the choice before and after a policy change has been introduced.
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