The Kaldor-Hicks Compensation Criterion states that a policy change is potentially welfare-improving if:

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Economics · Welfare Economics

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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The gainers could compensate the losers and still remain better off, even if compensation is not actually paid

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Answer 1

The change maximises total revenue regardless of distribution

Answer 2

Compensation is actually paid to all losers to make them indifferent

Answer 3

The gainers could compensate the losers and still remain better off, even if compensation is not actually paid

Answer 4

All individuals are made better off without anyone being worse off (Pareto improvement)

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