Welfare Measurement in Imperfect Markets

'Green accounting lies at the core of modern environmental economics. In this important book, Thomas Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund make an important contribution by focussing on green accounting in economies which are not in a first-best equilibrium. The book includes analyses of non-Pigouvian and distortionary taxation, externalities arising from transboundary pollution, imperfect competition, distributional issues and uncertainty. The approach is suitably formal and the policy relevance of each topic is discussed extensively. I can warmly recommend the book to all those who are interested in the theory as well as the applications of green accounting.' - Cees Withagen, Vrije Universiteit, Amsterdam and Tilburg University, The Netherlands This book cleverly integrates the research on welfare measurement and social accounting in imperfect market economies. In their previously acclaimed volume, Welfare Measurement, Sustainability and Green National Accounting, the authors focused on the external effects associated with environmental damage and analysed their role in the context of social accounting. This book adopts a much broader perspective by analysing a wide spectrum of resource allocation problems of real-world market economies. The authors' aim is to derive exact welfare measures in imperfect market economies and compare them with their counterparts in a first-best equilibrium. Using numerical analysis, they also attempt to make the leap from theory to practical application by measuring the empirical importance of market imperfections. Such analysis provides the tools for examining whether 'real life' approximations of the welfare contribution of external effects, such as information collected by using the willingness-to-pay method, actually capture true and accurate values. Finally, the authors address the theory of cost-benefit analysis, in terms of environmental and other public policies, in dynamic general equilibrium models. This book is an impressive investigation of the theory of social accounting, with particular emphasis on valuation problems facing imperfectly competitive markets. It will make challenging but highly rewarding reading for academics and researchers interested in environmental economics, welfare measurement, social accounting and green accounting.