Non-parametric well-being comparisons
(2018) , 41 pages
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- Abstract
- We study the problem of making interpersonal well-being comparisons when individuals have heterogeneous - possibly incomplete - preferences. We present a robust - also incomplete - criterion for well-being comparisons that states that one individual is better off than another one if the intersection between the extended upper contour set of the better off in- dividual and the extended lower contour set of the worse off individual is empty. We implement the criterion in the consumption-health space using an online survey with 2,260 respondents in the United States to investigate how incomplete the resulting interpersonal well-being comparison is. To chart the contour sets of the respondents, we propose a new "adapt- ive bisectional dichotomous choice" (ABDC) procedure that is based on a limited number of dichotomous choices and some mild non-parametric assumptions on the preferences. While the ABDC procedure does not reject that the preferences of a large majority of the respondents satisfy these non-parametric assumptions, it has suffcient power to reject several standard parametric assumptions such as linearity or Cobb-Douglas preferences for an overwhelming number of respondents. Finally, we find that about one fifth of all pairs of respondents can be ranked in a robust way with the proposed criterion. A more complete version of the criterion is able to rank more than half of the pairs.
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Citations
DECANCQ Koen, & NYS Annemie. (2018). Non-parametric well-being comparisons (CORE Discussion Paper 2018/21). https://hdl.handle.net/2078.5/173480