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Measuring Welfare Changes When Quantity Is Constrained

In this paper, the authors propose a simple and efficient method of estimating welfare measures in a n-equation consumer demand system when some quantities are constrained or rationed. The authors also estimate the variance of these measures. The method is evaluated using Monte Carlo studies of two demand systems. They also use the method to analyze the welfare costs of constraining the hours worked by married women in Canada. The GAUSS code for implementing the method is included.