G2TT
来源类型Discussion paper
规范类型论文
来源IDDP16132
DP16132 Welfare and Output with Income Effects and Taste Shocks
David Rezza Baqaee; Ariel Burstein
发表日期2021-05-10
出版年2021
语种英语
摘要We characterize how welfare responds to changes in budget set and technology when preferences are non-homothetic or subject to shocks, in both partial and general equilibrium. We generalize Hulten’s theorem, the basis for constructing aggregate quantity indices, to this context. We show that calculating changes in welfare in response to a shock only requires knowledge of expenditure shares and elasticities of substitution, and given these statistics does not require knowledge of income elasticities or taste shocks. We also characterize the gap between changes in welfare and changes in chained indices. We apply our results to long-run and short-run phenomena. In the long-run, we show that structural transformation, if caused by income effects, is roughly twice as important for welfare than what is implied by standard measures of Baumol’s cost disease. In the short-run, we show that when firms’ demand shocks are correlated with their supply shocks, industry-level price and output indices are biased, and this bias does not disappear in the aggregate. Finally, using the Covid-19 crisis we illustrate the differences between partial and general equilibrium notions of welfare, and we show that real consumption and real GDP are unreliable metrics for measuring welfare or production.
主题Macroeconomics and Growth
关键词Growth accounting Taste shocks Income effects Hulten's theorem Path dependence Production networks
URLhttps://cepr.org/publications/dp16132-0
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/545106
推荐引用方式
GB/T 7714
David Rezza Baqaee,Ariel Burstein. DP16132 Welfare and Output with Income Effects and Taste Shocks. 2021.
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