Global welfare comparisons

Global welfare comparisons

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Article ID: iaor20106973
Volume: 43
Issue: 4
Start Page Number: 1412
End Page Number: 1432
Publication Date: Nov 2010
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors:
Abstract:

To provide a normative foundation for transfers between different economies, one needs information on their ‘per capita welfare.’ This paper considers various methods for doing this and reaches the following conclusions: (i) Such global welfare comparisons are more demanding than usually thought. (ii) The ranking of methods differs from that of local (over-time) comparisons, with real comprehensive per capita NNP being the least impractical method. The lesson is that global welfare comparisons should be performed with great care. The comparisons must be made in local real prices calculated according to ‘purchasing-power-parity,’ where non-traded environmental amenities play an important role.

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