January 1, 1997

Social performance and fiscal policy: an application to MIMIC

In traditional macro-economic modelling aggregate consumption is often viewed as an indication of social welfare.

This paper adopts a more general concept of welfare. It proposes a criterion that allows household equivalence and income weighting. This criterion, called `social performance', enables an explicit valuation of leisure. It is applied to MIMIC, a general equilibrium model of the Dutch economy. Eight ways of fiscal policy reform are critically reviewed.

Keywords: social welfare, household equivalence, money metrics, weighted income indices, MIMIC, fiscal policy.