Well-being measurement with reference consumption

François Maniquet and Domenico Moramarco ()
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François Maniquet: Université catholique de Louvain, LIDAM/CORE, Belgium
Domenico Moramarco: Universit´a degli studi di Bari “Aldo Moro”

No 3350, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We axiomatically study how to measure well-being when individuals have heterogeneous preferences and consumption bundles are evaluated by comparison with some reference bundle (a poverty line bundle, an index of needs, the average consumption in a reference group, etc.). Our key requirement is that well-being remains constant if the reference bundle changes towards a bundle that the individual deems equivalent. Accounting for preferences may lead two individuals with identical consumption and reference bundles to have unequal well-being levels. To limit this inequality, we study four axioms based on the lattice structure of the set of indifference contours. We define and characterize five measures. One prominent measure corresponds to the ratio between equivalent incomes at consumption and at reference, where prices are chosen to minimize the difference between these incomes.

Keywords: Well-being measurement; heterogeneous preferences; reference; lattice (search for similar items in EconPapers)
JEL-codes: D63 I30 (search for similar items in EconPapers)
Pages: 40
Date: 2026-02-26
Note: In: Economic Theory, 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvrp:3350

DOI: 10.1007/s00199-026-01706-3

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