Welfare analysis when budget constraints are nonlinear: the case of flood hazard reduction.
Welfare analysis when budget constraints are nonlinear is considered in relation to flood hazard reduction. Nonlinear budget constraints arise when goods have a “quality” dimension or possess “characteristics” and the price of the composite good is a nonlinear function of its characteristics. Homo...
| Publicado en: | Journal of Environmental Economics & Management Vol. 26; pp. 181 - 200 |
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| Autores principales: | , , |
| Formato: | Artículo |
| Publicado: |
Academic Press Inc.
March 1994
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | Welfare analysis when budget constraints are nonlinear is considered in relation to flood hazard reduction. Nonlinear budget constraints arise when goods have a “quality” dimension or possess “characteristics” and the price of the composite good is a nonlinear function of its characteristics. Homogeneity is usually not characteristic of indirect utility functions and demand functions when budget constraints are nonlinear. In this situation, willingness to pay methods that impose homogeneity—or fail to impose restrictions implied by nonlinear budget constraints—on demands are not suitable. A direct utility approach can be adopted as a straightforward method of estimating willingness to pay when budget constraints are nonlinear. In this way, exact and biased welfare measures are obtained without integration. |
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