François Maniquet

will give a presentation on

Well-being measurement with reference consumption

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 three measures. One prominent measure corresponds to the ratio between equivalent income at consumption and at reference, where prices are chosen to maximize well-being