The Compensation Principle and the National Income Test

Aldo Montesano

The B.E. Journal of Theoretical Economics, 2007, vol. 7, issue 1, 12

Abstract: According to a common opinion in economic literature, the National Income Test provides a necessary condition for potential Pareto dominance. This paper demonstrates that this statement is true in pure-exchange economies, but, in general, false in production economies.

Keywords: compensation principle; national income test; potential welfare; potential pareto dominance (search for similar items in EconPapers)
Date: 2007
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DOI: 10.2202/1935-1704.1427

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