*PhD student of Health Economics,
**Associate of economics group,
*** Assistant of Economics group,
****Associate of Economics Group,
1Corresponding Author
Elasticity of marginal utility of consumption (EMUC) is one of the most important parameters in welfare economics. It is useful in calculating of marginal utility and social discount rate. In this paper, we introduced revealed social values approach and valuated EMUC with this approach and older approach (behavioral). Results showed that the rate was 1.92 that was larger than older valuation (1.56). It was revealed that in Iran, changes caused such rate to increase. Its effect was decreasing 5.23% per capita welfare in Iran. Also per capita welfare in 2011 was 6,225,482.
Elasticity of marginal utility of consumption is one of the main parameters in welfare economics, which is useful in valuing marginal utility of different income classes, and valuing social discount rate in a country. Its valuation can be used in evaluation of effect on welfare of social projects.
The said parameter has previously been evaluated for Iran based on behavioral approach using statistical data for the period of 1965–2003. In this research, in addition to calculating it using the old approach (using data for 1982–2011), revealed social values approach has been introduced and used to estimate this parameter.
Elasticity of marginal utility of consumption for Iran was valuated to be 1.92 and 1 using behavioral approach, and revealed approach, respectively.
Because government revenue from income tax levied on natural persons constitutes a low percentage of government revenue, the result obtained from revealed approach for Iran is not reliable, and only the elasticity of 1.92, which is larger than the previously valuated elasticity (1.56), can be used as the basis of decision making in Iran. This value indicates increased elasticity of marginal utility of consumption in Iran in the last 9 years, which in turn has led to a 5.23% decline in average national welfare. It should be noted that an average per capita welfare in of 6,225,482 was obtained for the year 2011. Further, in conclusion, the methodology of using elasticity of marginal utility of consumption for cost-welfare-based feasibility study was provided.
Elasticity of marginal utility of consumption (inequality aversion index), cost-welfare, marginal tax rate, revealed social values approach, behavioral approach
