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Title: Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US

Citation Type: Working Paper

Publication Year: 2011

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Abstract: Following the report of the Stiglitz Commission, measuring and comparing well-being across countries has gainedrenewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most oftenrely on the assumption of identical preferences to avoid the difficulties related to interpersonal comparisons. In thispaper, we suggest an international comparison based on individual welfare rankings that fully retain preferenceheterogeneity. Focusing on the consumption-leisure trade-off, we estimate discrete choice labor supply models usingharmonized microdata for 11 European countries and the US. We retrieve preference heterogeneity within and acrosscountries and analyze several welfare criteria which take into account that differences in income are partly due todifferences in tastes. The resulting welfare rankings clearly depend on the normative treatment of preferenceheterogeneity with alternative metrics. We show that these differences can indeed be explained by estimated preferenceheterogeneity across countries rather than demographic composition

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Authors: Peichl, Andreas; Decoster, Andre; Siegloch, Sebastian; Neumann, Dirk; Bargain, Olivier; Dolls, Mathias

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Publication Number: EM5/11

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Data Collections: IPUMS International, IPUMS CPS

Topics: Labor Force and Occupational Structure, Other, Poverty and Welfare

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