Assessing Household Welfare in Food Consumption: An Application of the Vartia Algorithm

Fecha de Publicación
Autores
Paulo Cesar Ramos Huarachi & Álvaro Iber Aruquipa Yujra
Referencia
Bolivian Economic Research Papers (2022) Vol. 5(2), 29-52
Palabras claves
Microeconometrics
Welfare economics
Vartia algorithm.
Assessing Household Welfare in Food Consumption

This paper focuses on welfare assessment applied to the food sector, which is a relevant factor for Bolivian households. In 2022, Bolivia experienced stable inflation despite a generalized acceleration of prices worldwide, affecting real wages, purchasing power, and households’ consumption baskets. The study quantified changes in economic welfare based on household food expenditures, taking price changes into account. We applied the Vartia algorithm to compute the Equivalent Variation (EV) and the Compensating Variation (CV). The EV and CV results were 1.19% and 1.64%, respectively. We also report estimates by income decile, department, and economic activity. This study informs economic and social policymaking—particularly minimum wage setting—by providing evidence on the increases required in response to rising food prices.