A simplified model for social welfare analysis. An application to Spain, 1973-74 to 1980-81

Abstract

Most of the literature on income distribution has been concentrated on inequality. In this paper we introduce also efficiency considerations to analize social welfare according to the established theory in Welfare Economics. We propose a simple but useful specification which combines three features: (i) a procedure to make welfare comparisons across households with different needs; (ii) the use of household specific statistical price indices to make intertemporal comparisons in real terms, and (iii) the selection of measurement instruments on the grounds of their properties for applied work, including the important additive separability property. The methodology is applied to the study of the role of prices and demographic effects in the evolution of the standard of living in Spain from 1973-74 to 1980-81.