The assumption of equal marginal utility of income: how much does it matter?

In most applied cost-benefit analyses, individual willingness to pay (WTP) is aggregated without using explicit welfare weights. This can be justified by postulating a utilitarian social welfare function along with the assump tion of equal marginal utility of income for all individuals. However, sinc e marginal utility is a cardinal concept, there is no generally accepted wa y to verify the plausibility of this latter assumption, nor its empirical i mportance. In this paper, we use data from seven contingent valuation studi es to illustrate that if one instead assumes equal marginal utility of the public good for all individuals, aggregate monetary benefit estimates chang e dramatically. (C) 2001 Elsevier Science B.V. All rights reserved.