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Benefit-Cost Analysis And Distributional Weights: An Overview, Matthew D. Adler
Benefit-Cost Analysis And Distributional Weights: An Overview, Matthew D. Adler
Faculty Scholarship
Standard cost-benefit analysis (CBA) is insensitive to distributional concerns. A policy that improves the lives of the rich, and makes the poor yet worse off, will be approved by CBA as long as the policy’s aggregate monetized benefits are positive. Distributional weights offer an apparent solution to this troubling feature of the CBA methodology: adjust costs and benefits with weighting factors that are inversely proportional to the well-being levels (as determined by income and also perhaps non-income attributes such as health) of the affected individuals.
Indeed, an academic literature dating from the 1950s discusses how to specify distributional weights. And …