Applied Welfare Economics with Discrete Choice Models

45 Pages Posted: 15 Feb 2001 Last revised: 2 Jan 2002

See all articles by Harvey S. Rosen

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Kenneth A. Small

University of California, Irvine - Department of Economics

Date Written: February 1979

Abstract

Economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices. Such models are potentially very important in evaluating the impact of government programs upon consumer welfare. But very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations. This paper shows how the conventional methods of applied welfare economics can be modified to handle such cases. It focuses on the computation of the excess burden of taxation, and the evaluation of quality change. The results are applied to stochastic utility models, including the popular cases of probit and logit analysis. Throughout, the emphasis is on providing rigorous guidelines for carrying out applied work.

Suggested Citation

Rosen, Harvey S. and Small, Kenneth A., Applied Welfare Economics with Discrete Choice Models (February 1979). NBER Working Paper No. w0319. Available at SSRN: https://ssrn.com/abstract=260499

Harvey S. Rosen (Contact Author)

Princeton University - Department of Economics ( email )

001 Fisher Hall
Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Kenneth A. Small

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
714-824-5658 (Phone)
714-824-2182 (Fax)

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