A Note on the Relation between Income and Welfare

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Abstract

This notes shows how intertemporal and cross-section welfare are related in a general class of stochastic continuous time models. In the steady state intertemporal welfare is shown to be proportional to cross-sectional income. This result holds for economies where each agent maximizes his own expected discounted utility. That is, we do not assume that aggregate utility is maximized. We provide an application to search in the labor market and one to pollution externalities.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages15
Volume2000-05
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-05

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