X-inefficiency in the use of income to attain economic satisfaction

This investigation uses a subjective well-being approach to provide a novel empirical answer to an old normative debate in economic literature: whether consumers use efficiently their income. Based on a large database from Mexico, the paper shows that there exists substantial X-inefficiency in the use of income; even when a relaxed criterion to define the thick frontier is followed. X-inefficiency in the use of income can emerge from personal errors and from social-organization deficiencies. Sustainable development concerns make it critical to focus on reducing X-inefficiency as an alternative way to increase economic well-being.