Spurious Deadweight Gains

July 2000 <p> Marshallian consumer surplus (MCS) is generally an inaccurate measure of welfare change because it neglects income effects. Suppose these effects overturn the usual demand response to a price change. Then, the deadweight loss from a distortionary tax or subsidy has the wrong sign, that is, there is a spurious deadweight gain. <p> JEL Classification: D11, D6. Keywords: Marshallian consumer surplus, Giffen goods, Stability of equilibrium

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Year of publication:	2000-07
Authors:	Facchini, Giovanni ; Hammond, Peter J. ; Nakata, Hiroyuki
Institutions:	Department of Economics, Stanford University
Subject:	Marshallian consumer surplus \| Giffen goods \| Stability of equilibrium

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Classification:	D11 - Consumer Economics: Theory ; D6 - Welfare Economics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005623802