Empirical Welfare Analysis with Hedonic Budget Constraints

Debopam Bhattacharya, Ekaterina Oparina and Qianya Xu

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We analyze demand settings where heterogeneous consumers maximize utility for product attributes subject to a nonlinear budget constraint. We develop nonparametric methods for welfare-analysis of interventions that change the constraint. Two new findings are Roy's identity for smooth, nonlinear budgets, which yields a Partial Differential Equation system, and a Slutsky-like symmetry condition for demand. Under scalar unobserved heterogeneity and single-crossing preferences, the coefficient functions in the PDEs are nonparametrically identified, and under symmetry, lead to path-independent, money-metric welfare. We illustrate our methods with welfare evaluation of a hypothetical change in relationship between property rent and neighborhood school-quality using British microdata.

Keywords: Hedonic Model; Nonlinear Budget; Nonparametric Identification; Welfare; Compensating/Equivalent Variation; Partial Differential Equation; Slutsky Symmetry; Roy's Identity; Path Independence (search for similar items in EconPapers)
JEL-codes: C14 H23 I30 (search for similar items in EconPapers)
Date: 2024-12-09
New Economics Papers: this item is included in nep-dcm and nep-upt
Note: db692, qx230
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https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe2468.pdf

Related works:
Working Paper: Empirical Welfare Analysis with Hedonic Budget Constraints (2024)
Working Paper: Empirical welfare analysis with hedonic budget constraints (2024)
Working Paper: Empirical welfare analysis with hedonic budget constraints (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2468

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