Welfare Analysis: Bridging the Partial and General Equilibrium Divide for Policy Analysis

Advances in theoretical and computable general equilibrium modeling brought their conceptual foundations in line with standard microeconomic constructs. This reduced the theoretical and empirical gap between welfare measurements using a partial or a general equilibrium approach. However, the separation of the partial and general equilibrium literatures lingers in many applications which this manuscript seeks to bridge. The now shared conceptual foundations, the importance of functional specification, the role of common price movements, and closure rules are discussed. The continuing US Government exclusion of secondary effects from welfare measures in some applications is questioned.