Consumer Benefits of Infrastructure Services

Abstract

This paper provides methodologies for evaluating consumer benefits of infrastructure services using potentially observable information. We define benefit measures for consumers and, using general principles from the index number literature, derive alternative first and second order approximations to these measures under the assumption of fixed prices for market goods and services. We then describe how the benefit measures and their associated approximations can be used in quantifying the economic benefits when prices are allowed to change endogenously as the provision of infrastructure services changes. In addition, under quite unrestrictive assumptions, a measure of welfare change based only on potentially observable data is derived.

Keywords: Consumer benefits, infrastructure services, first order approximation, second order approximation, flexible functional forms, index number theory

JEL Classification: C43, D61, H41, H43, H54