An Approach to Applied Welfare Economics

Raaj K. Sah and Joseph E. Stiglitz

in Peasants versus City-Dwellers

Published in print February 2002 | ISBN: 9780199253579
Published online January 2005 | e-ISBN: 9780191601682 | DOI:
An Approach to Applied Welfare Economics

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One of the contributions of this book is to use and develop the principles of modern public finance for the analysis of LDCs (less developed countries). This is done by borrowing from two intellectual traditions: that relating to public finance, and that relating to development economics. This chapter briefly reviews the four major strands in public finance literature that form the background to the study. These are: general-equilibrium analysis; Pigouvian welfare economics and optimal taxation; the New Welfare Economics (which says that interpersonal utility comparisons are not meaningful, so the utilitarian approach to adding up utilities is nonsense, and one allocation can only be said to be better than another when the first was a Pareto-improvement over the second); and the New New Welfare Economics, which borrows from the previous three strands, and seeks to analyse the scope of available tax instruments, and to take into account and explain market imperfections. This last approach is the one mainly used in the book to approach applied welfare economics for LDCs; various aspects of the approach are discussed.

Keywords: applied welfare economics; development economics; general-equilibrium analysis; less developed countries (LDCs); market imperfections; New New Welfare Economics; New Welfare Economics; optimal taxation; Pigouvian welfare economics; public finance; tax instruments; taxation; welfare economics

Chapter.  4037 words. 

Subjects: Economic Development and Growth

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