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The income distribution parameter in project appraisal (英语)

The weighting of the consumption increments accruing to people in various income groups that result from project implementation has been suggested. This paper takes the private valuation of the utility of consumption as the basis for deriving the social elasticity of the marginal utility of consumption. Results of various studies provide empirical support for the conjecture that elasticity of the marginal utility of consumption is negatively correlated with incomes in an intercountry context. Possible effects on entrepreneurial risk-taking and on savings would need to be considered in judging the appropriateness of using income distributional weights in project appraisal. Policies aimed at improving income distribution may be damaging for the group they are supposed to serve in some situations. The question of whether actions taken to reduce income inequalities necessarily improve the lot of the poor in the long run needs to be raised. It is suggested here that reliance be placed on the private evaluation of the elasticity of the marginal utility of consumption. This in turn calls for further research to improve available estimates of this elasticity. 27 references.