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What is an appropriate welfare measure for efficiency of local public policies inducing migration?

Tatsuhito Kono and Akio Kishi

Mathematical Social Sciences, 2018, vol. 91, issue C, 25-35

Abstract: We demonstrate what welfare measure should be used for local public policies inducing migration. We show that the two conventional definitions of welfare measures having equivalency with compensation testing in a single-location economy without externalities have inconsistencies with compensation testing in a spatial economy: one definition has no equivalency with compensation testing even without externalities, and the other definition has difficulties arising from a problem in which the measure before a project has a non-zero value. Finally, we demonstrate that a specific welfare measure defined by Wheaton (1977) has appropriate properties with compensation testing in both cases with and without externalities.

Date: 2018
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