New compensating and equivalent variation closed-form solutions for non-separable public goods

This study derives closed-form solutions for compensating variation (CV) and equivalent variation (EV) for both marginal and non-marginal changes in public good provision given homothetic, non-separable utility. The CV and EV expressions identify a ‘relative preference effect’ that accounts for observed asymmetries between willingness to pay (WTP) and willingness to accept (WTA), without relying on behavioural assumptions, and a single sufficient statistic summarizes consumer preferences over private and public goods. These expressions provide tractable tools for applied welfare analysis, and we illustrate an application using published WTP estimates of air quality improvements.