Welfare Measurement in Imperfect Markets
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Welfare Measurement in Imperfect Markets

A Growth Theoretical Approach

Thomas Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund

This book cleverly integrates the research on welfare measurement and social accounting in imperfect market economies. In their previously acclaimed volume, Welfare Measurement, Sustainability and Green National Accounting, the authors focused on the external effects associated with environmental damage and analysed their role in the context of social accounting. This book adopts a much broader perspective by analysing a wide spectrum of resource allocation problems of real-world market economies.
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Chapter 8: Three Emerging Issues in Social Accounting

Thomas Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund


This chapter concerns three issues which are highly relevant for social accounting, although they have been neglected (or at least not dealt with thoroughly) in previous chapters. In Section 8.1, we consider some additional aspects of welfare measurement in a differential game framework, thereby extending the analyses in Chapters 5 and 6. Section 8.2 addresses the implications of unemployment for social accounting as well as the related issue of union wage formation. Finally, in Section 8.3, we examine a situation where the social planner has objectives for the distribution of utility or consumption across consumers at each point in time and consider the implications of distributional objectives for social accounting. 8.1 WELFARE MEASUREMENT IN NASH FEEDBACKLOOP GAMES AND STACKELBERG GAMES In this section, we consider two aspects of welfare measurement related to differential games. The first is welfare measurement in the case where the resource allocation is governed by a Nash game in feedback-loop form. This complements our analysis of the welfare measurement problem associated with a Nash game in open-loop form in Chapter 6. The second aspect concerns deriving welfare measures for the leader and follower, respectively, in a Stackelberg game. Welfare measurement in a Stackelberg game situation was discussed in Chapter 5, where the government acts as leader and the private sector as follower in the context of an optimal tax problem. Here, we provide a more formal treatment of players and strategies. We keep the analysis simple by introducing a model where two agents compete in harvesting...

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