We demonstrate what welfare measure should be used for local public policies inducing migration. We show that the two conventional definitions of welfare measures having equivalency with compensation testing in a single-location economy without externalities have inconsistencies with compensation testing in a spatial economy: one definition has no equivalency with compensation testing even without externalities, and the other definition has difficulties arising from a problem in which the measure before a project has a non-zero value. Finally, we demonstrate that a specific welfare measure defined by Wheaton (1977) has appropriate properties with compensation testing in both cases with and without externalities.
ASJC Scopus subject areas
- Sociology and Political Science
- Social Sciences(all)
- Statistics, Probability and Uncertainty