For a given specication of preferences, we calculate consumption-equivalent welf

Question

For a given specication of preferences, we calculate consumption-equivalent welfare for various countries and years using data on consumption, leisure, consumption inequality, leisure inequality, and mortality by age. Our main nding is that cross-country inequality in welfare is even greater than inequality in incomes. More specically, our ndings can be summarized as follows: First, the correlation between our welfare index and income per capita is very high.

This is because average consumption differs so much across countries and is strongly correlated with income. Second, living standards in Western Europe are much closer to those in the United States than it would appear from GDP per capita. Longer lives with more leisure time and more equal consumption in Western Europe largely offset their lower average consumption vis a vis the United States. Third, in most developing economies, welfare is markedly lower than income, due primarily to shorter lives but also to more inequality. Finally, economic growth in many countries of the world (the exception being Sub-Saharan Africa) is about 50% faster than previously appreciated, a boost almost entirely due to declining mortality. Our calculations entail many strong assumptions. We therefore checked and conrmed robustness to alternative welfare measures and alternative utility functions over consumption and leisure. With the requisite data, one could relax more of our assumptions. Mortality by age surely differs within countries (e.g. by education). Preferences over consumption and leisure must differ within countries, perhaps mitigating the welfare cost of unequal outcomes. Where household data is available going back far enough, one could better estimate the present discounted value of welfare.23 One could carry out similar calculations across geographic regions within countries, or across subgroups of a country’s population (e.g., by gender or race). Even more ambitious, but conceivable, would be to try to account for some of the many important factors we omitted entirely, such as morbidity, the quality of the natural environment, crime, political freedoms , and intergenerational altruism. We hope our simple measure proves to be a useful building block for work in this area.

Required:        1. Explain/summarize the above case study conclusion or observation

Explanation / Answer

The case can be summarised as under with the basic outcomes observed in various parts of the world:

But in addition to this we can conclude the case study with the following key observations:

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.