Question on welfare metrics

Dear Professor Pfeifer,

I have learned that welfare metrics is generally based on the consumption equivalent variation in households’ utility function. However, if I have an entrepreneurs’ agent (which also contains consumption in the utility function) in the model , do I need to consider the welfare variation of this part? And also, is it the right way if I just sum the households’ welfare value and entrepreneurs’ welfare value?

Thank you very much for your time on this.

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Dear Professor Pfeifer,

Is it acceptable if I do not calculate the value of compensating variation but just compare the value of welfare under different policies?

That depends on your goal. If you want to quantitatively interpret the number, then you need to compute some form of compensating variation.