Abstract
The econometric literature on program-evaluation and optimal treatment-choice takes functionals of outcome-distributions as target welfare, and ignores program-impacts on unobserved utilities, including utilities of those whose outcomes may be unaffected by the intervention. We show that in the practically important setting of discrete-choice, under general preference-heterogeneity and income-effects, the distribution of indirect-utility is nonparametrically identified from average demand. This enables cost-benefit analysis and treatment-targeting based on social welfare and planners' distributional preferences, while also allowing for general unobserved heterogeneity in individual preferences. We demonstrate theoretical connections between utilitarian social welfare and Hicksian compensation. Two empirical applications illustrate our results.
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