We axiomatically study how to measure well-being when individuals have heterogeneous preferences and consumption bundles are evaluated by comparison with some reference bundle (a poverty line bundle, an index of needs, the average consumption in a reference group, etc.). Our key requirement is that well-being remains constant if the reference bundle changes towards a bundle that the individual deems equivalent. Accounting for preferences may lead two individuals with identical consumption and reference bundles to have unequal well-being levels. To limit this inequality, we study four axioms based on the lattice structure of the set of indifference contours. We define and characterize five measures. One prominent measure corresponds to the ratio between equivalent incomes at consumption and at reference, where prices are chosen to minimize the difference between these incomes.
Well-being measurement with reference consumption
Moramarco, Domenico
2026-01-01
Abstract
We axiomatically study how to measure well-being when individuals have heterogeneous preferences and consumption bundles are evaluated by comparison with some reference bundle (a poverty line bundle, an index of needs, the average consumption in a reference group, etc.). Our key requirement is that well-being remains constant if the reference bundle changes towards a bundle that the individual deems equivalent. Accounting for preferences may lead two individuals with identical consumption and reference bundles to have unequal well-being levels. To limit this inequality, we study four axioms based on the lattice structure of the set of indifference contours. We define and characterize five measures. One prominent measure corresponds to the ratio between equivalent incomes at consumption and at reference, where prices are chosen to minimize the difference between these incomes.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
