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Subjective economic welfare, Volume 1
 
Author:Ravallion, Martin; Lokshin, Michael; Collection Title:Policy, Research working paper ; no. WPS 2106
Country:Russian Federation; Date Stored:2001/04/25
Document Date:1999/04/30Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:(Historic)Economic Policy
Region:Europe and Central AsiaReport Number:WPS2106
Sub Sectors:Macro/Non-TradeSubTopics:Environmental Economics & Policies; Economic Theory & Research; Inequality; Health Economics & Finance; Services & Transfers to Poor; Public Health Promotion; Poverty Diagnostics
Volume No:1  

Summary: Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of "utility" were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from "poor" to "rich" on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines. Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of "utility" were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from "poor" to "rich" on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines.

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