2013): Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US,Social Choice and Welfare

comparing well-being across countries has gained renewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most often rely on the assumption of identical preferences to avoid the di ¢ culties related to interpersonal comparisons. In this paper, we suggest an international comparison based on individual welfare rankings that fully retain preference heterogeneity. Focusing on the consumption-leisure trade-o¤, we estimate structural discrete choice labor supply models using harmo-nized microdata for 11 European countries and the US. We retrieve individual and cross-country preference heterogeneity and analyze recently proposed welfare criteria which take into account that di¤erences in income might partially be due to di¤erences in tastes. We nd that the resulting ranking of individuals across countries clearly depends on the nor-mative treatment of preference heterogeneity with alternative welfare metrics. This leads to substantial rank reversals across nations, which is striking given the rather homoge-neous set of countries we consider. We show that these di¤erences in welfare orderings can indeed be explained by di¤erences in estimated preferences- rather than demographic composition