![Review of Economics and Statistics, accepted Journal Cover](/research-files/images/journal_covers/TRES.png)
Bhattacharya, D. and Komarova, T.
Incorporating Social Welfare in Program-Evaluation and Treatment Choice
Review of Economics and Statistics, accepted
pp. 1-45 (2024)
Abstract: We introduce a notion of money-metric social welfare for discrete choice, under unrestricted heterogeneity and income-effects. It is the maximized indirect utility under normalization of the outside option. It also equals the amount of income necessary to achieve a given level of utility, while certain choices are prohibited. We show that the distribution of this quantity is non-parametrically identified as a closed-form functional of average structural demand for the outside option, making it useful for cost-benefit analysis and optimal targeting. An illustration with private tuition subsidies in India shows that the income-path of usage-maximizing subsidies differs significantly from welfare-maximizing ones.
Keywords: Discrete Choice, Unobserved Heterogeneity, Nonparametric Identification, Social Welfare, Indirect Utility, Cost-Benefit Analysis, Policy Interventions
JEL Codes: C14, C25, D12, D31, D61, D63
Author links: Debopam Bhattacharya
Publisher's Link: https://doi.org/10.1162/rest_a_01424