Consumer Welfare under Individual Heterogeneity

Charles Gauthier, Sebastiaan Maes () and Raghav Malhotra

Papers from arXiv.org

Abstract: Welfare effects of price changes are often estimated with cross-sections; however, such data do not identify demand models with heterogeneous consumers. We develop a method that leverages moments of demand to construct a local approximation to the curvature of the expenditure function, which is essential for welfare analysis. Our method applies to arbitrary cross-sections and delivers a nonparametric approximation to the entire distribution of consumer welfare, robust to unobserved preference heterogeneity. We provide moment- and quantile-based estimation strategies that are simple to implement.

Date: 2023-03, Revised 2025-06
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2303.01231

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