EXACT AND SUPERLATIVE WELFARE CHANGE INDICATORS

An exact welfare change indicator is defined to be a known function of the price and quantity data for two periods (for a utility maximizing consumer) which is exactly equal to the Hicksian equivalent variation. A welfare change indicator is termed superlative if it is exactly equal to the equivalent variation for an expenditure function which has a second-order approximation property. The paper exhibits a number of superlative welfare change indicators, and also reviews the earlier attempts of Hicks and Weitzman to obtain equivalent variation measures that had a second-order approximation property.