The elevated status of the elasticity of marginal utility of consumption

David Evans

Applied Economics Letters, 2004, vol. 11, issue 7, 443-447

Abstract: The latest UK Treasury guidance on appraisal and evaluation in central government raises the status of the elasticity of marginal utility of consumption (e). While estimates of e are sensitive to a measurement approach, a case is made for placing some emphasis on a method based on consumer demand analysis. Alternative demand models are estimated for the UK and from the best results an e value of 1.6 emerges. For EU countries both this and other methods can be used to measure e. This, for example, permits a cross-country comparison of alternative measures of the social discount rate on a methodologically consistent basis.

Date: 2004
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DOI: 10.1080/1350485042000189541

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