Yrjö Vartia
Encyclopedia
Yrjö O. Vartia is the professor of econometrics and the former head of Department of Political and Economic Studies at the University of Helsinki
, Finland.
, Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions. It explains a numerical technique for solving a system of demand equations to derive the underlying utility function, i.e. for "calculating exact consumer welfare assuming the consumer faces a linear budget constraint". This is important because it greatly facilitates the measurement of changes in welfare, a major part of the work of economists.
More generally, Vartia's expertise is axiomatic index numbers
, where he is known for his "consistency in aggregation" test and his discovery, along with Kazuo Sato of the "ideal log-change index", which utilised logarithms and logarithmic mean
to define the Sato-Vartia or "Vartia II" index (both 1976). He proposed also in his dissertation "Relative Changes and Index Numbers" in 1976 another index known as Montgomery-Vartia (or "Vartia I") index, which satisfies Time and Factor Reversal Tests and is Consistent in Aggregation. But it satisfies only a weaker form of Proportionality Test WPT along with, say, the factor antithesis FA(Törnqvist) of the Törnqvist formula. According to WPT, if both prices and quantities change proportionally, the price index must equal the common factor of proportionality. Montgomery-Vartia index was proposed independently in another notation by Montgomery in 1937.
University of Helsinki
The University of Helsinki is a university located in Helsinki, Finland since 1829, but was founded in the city of Turku in 1640 as The Royal Academy of Turku, at that time part of the Swedish Empire. It is the oldest and largest university in Finland with the widest range of disciplines available...
, Finland.
Career
He received his B.S. (mathematics) in 1968 and his M.A. (statistics) in 1971 from the University of Helsinki and Licentiate of Philosophy and Ph.D. (statistics) from the University of Tampere, Finland in 1976. Associate professor of Statistics at the University of Helsinki in 1980. Professor of Statistics at the Helsinki School of Economics HSE in 1984 and professor of Economics (especially econometrics) at the University of Helsinki since 1987.Research on Index Numbers
Vartia is best known for his 1983 paper in EconometricaEconometrica
Econometrica is a peer-reviewed academic journal of economics, publishing articles not only in econometrics but in many areas of economics. It is published by the Econometric Society and distributed by Wiley-Blackwell. Econometrica is one of the most highly ranked economics journals in the world...
, Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions. It explains a numerical technique for solving a system of demand equations to derive the underlying utility function, i.e. for "calculating exact consumer welfare assuming the consumer faces a linear budget constraint". This is important because it greatly facilitates the measurement of changes in welfare, a major part of the work of economists.
More generally, Vartia's expertise is axiomatic index numbers
Index (economics)
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from...
, where he is known for his "consistency in aggregation" test and his discovery, along with Kazuo Sato of the "ideal log-change index", which utilised logarithms and logarithmic mean
Logarithmic mean
In mathematics, the logarithmic mean is a function of two non-negative numbers which is equal to their difference divided by the logarithm of their quotient...
to define the Sato-Vartia or "Vartia II" index (both 1976). He proposed also in his dissertation "Relative Changes and Index Numbers" in 1976 another index known as Montgomery-Vartia (or "Vartia I") index, which satisfies Time and Factor Reversal Tests and is Consistent in Aggregation. But it satisfies only a weaker form of Proportionality Test WPT along with, say, the factor antithesis FA(Törnqvist) of the Törnqvist formula. According to WPT, if both prices and quantities change proportionally, the price index must equal the common factor of proportionality. Montgomery-Vartia index was proposed independently in another notation by Montgomery in 1937.