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Beyond GDP: Is there a law of one shadow price?

Fabrice Murtin (), Romina Boarini, Juan Cordoba and Marla Ripoll ()

European Economic Review, 2017, vol. 100, issue C, 390-411

Abstract: This paper builds a welfare measure encompassing household disposable income, unemployment and longevity, which are valued either from life satisfaction data (“subjective shadow prices”) or from calibrated utility functions (“model-based shadow prices”). The two different sets of shadow prices are shown to be broadly consistent once a number of conditions are fulfilled: i) running life satisfaction regressions at the country level rather than at the individual level to reduce the downward bias on the income variable due to measurement errors; (ii) valuing the unemployment risk in a state-contingent framework rather than under the veil of ignorance; (iii) disentangling relative risk aversion parameters for unemployment and vital risks; (iv) calibrating the utility function on adult lifespan rather than life expectancy at birth.

Keywords: Welfare; Beyond GDP; Value of statistical life; Shadow price (search for similar items in EconPapers)
Date: 2017
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Working Paper: Beyond GDP: Is There a Law of One Shadow Price? (2016) Downloads
Working Paper: Beyond GDP: Is there a law of one shadow price? (2015) Downloads
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DOI: 10.1016/j.euroecorev.2017.09.001

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