Leisure-inclusive welfare indices, such as the real wage index, have been previously investigated only with aggregate data. Using micro data, however, these indices show the effects of increasing labor market employment of household members. Real wage, expenditure, and nonlabor income indices are compared across six types of husband/wife households. These indices are also compared to ad hoc real wage and leisure-exclusive index measures. Doubt is cast on past results based upon aggregate data. I.

This paper uses computable general equilibrium models to demonstrate that partial-equilibrium welfare measures can offer reasonable approximations of the true welfare changes for large exogenous changes. With consistency in the size and direction of the indirect price effects associated with large shocks, single-sector partial-equilibrium measures will exhibit small errors. Otherwise the errors can be substantial and difficult to sign.

This paper reports the results of an evaluation of partial-equilibrium welfare measures of the effects of large multisector shocks to an economic system. A nine a developed economy was used in the analysis. The findings indicate that the errors in single-sector, partial-equilibrium welfare measures depend on the consistency in the signs and approximate magnitude of indirect price effects. Disparities in either the direction or size of price changes in the indirectly affected markets can lead to large errors in the partial-equilibrium welfare measures.