Equity-efficiency Trade-off Research Articles

Exploring the geographical equity-efficiency tradeoff in cycling infrastructure planning

Cycling is affordable, healthy, and sustainable, but access to destinations on low-stress safe cycling routes in most cities is both limited and unevenly distributed. Many cities are expanding cycling networks to improve safety, increase cycling mode share, and increase diversity in access to cycling, however resources remain limited which requires prioritization of infrastructure. When proposed infrastructure locations are optimized to provide the highest average access to opportunities using a utilitarian definition of accessibility, marginalized groups and locations may be further left behind. This occurs since the greatest gains to network connectivity, using a utility definition, come from expansions inside or directly adjacent to the densest network areas. We compare utilitarian and equity-driven planning strategies for cycling network expansion and explore tradeoffs in spatial coverage, equity, and efficiency, using Toronto, Canada as a case study. We find that optimizing accessibility in several small regions instead of city-wide leads to an infrastructure plan that is more spatially dispersed. Further, we show that an optimization model targeting low-access areas produces an infrastructure plan with more regions meeting a minimum threshold of accessibility but with lower average accessibility gains, indicating the presence of an equity-efficiency tradeoff. We also find that infrastructure projects that maximize a region's accessibility to jobs are often located outside that region, challenging political perceptions of "local" infrastructure and benefits. These results inform planning, advocacy, design, and policy, and shed light on spatial and socio-demographic equity tradeoffs in deciding where to add cycling infrastructure.

Progressive Taxation and Social Welfare: Quantifying the Effects of the “German Tax-Reform 2000”

Abstract The German “Tax-Reform 2000” involved a strong reduction in the progressivity of labor income taxation. It led to a rise in overall labor income, but also increased income inequality. Utilizing data from the German Socio-Economic Panel (SOEP. 2016. Socio-Economic Panel (SOEP), Data for Years 1984–2016, Version 33) for the years 1998–2007, we employ a general equilibrium framework à la Antràs et al. (Antràs, P., A. De Gortari, and O. Itskhoki. 2017. “Globalization, Inequality and Welfare.” Journal of International Economics 108: 387–412) characterized by heterogeneous individuals. The model imposes a constant rate of tax progressivity and allows for a theory-consistent decomposition of social welfare that highlights the equity-efficiency trade-off, namely into (i) the fundamental social welfare level that would arise in a Kaldor-Hicks economy with lump-sum transfers, (ii) a correction term that accounts for the social cost of inequality à la Atkinson (Atkinson, A. B. 1970. “On the Measurement of Inequality.” Journal of Economic Theory 2 (3): 244–63) or Sen (Sen, A. 1970. Collective Choice and Social Welfare. Harvard University Press), and (iii) a correction term for the social cost of distortionary taxation. Our estimations show that the German tax system can be well approximated by the imposed tax schedule and that the reform implied a fall in the degree of tax progressivity. Under the baseline calibration, the numerical analysis yields the following results: First, the main driver of growth in social welfare from 1998 to 2007 was fundamental social welfare. Second, the counterfactual analysis shows that the reform resulted in an annual average income growth of 0.62 % and an increase in income inequality of 0.32 %, indicating an only modest increase in social welfare of 0.07 %. Third, the actual tax progression converged to its social welfare maximizing level.

Globalisation and the efficiency-equity trade-off

We revisit the effects of globalisation over the past 50 years in a large sample of advanced and emerging countries. We use accessions to Globalisation Clubs (WTO, OECD, EU), financial liberalisation and an instrument for trade openness to study the trade-off between efficiency (proxied by real GDP per capita and TFP) and equity (proxied by the labour share of income and the Gini index of inequality). We find that (i) most of our episodes lead to an increase in trade openness (ii) the effects on GDP per capita are mostly positive with some interesting exceptions and (iii) there is little evidence that globalisation shocks lead to more inequality.

Effects of higher education subsidies on equity and efficiency across developmental stages

This study investigates the impact of taxes and subsidies for higher education on equity–efficiency trade-offs under various phases of higher education development. A scholarship program emerges as the most effective subsidy for higher education across all developmental stages. During both early and later phases, a universal grant proves more effective than a scholarship grant in reducing inequality. At the later stages of higher education development, the enrollment rate increases for universal grants but decreases for other policies, implying that the recent shift away from universal grant schemes in the UK could lead the enrollment rate to decline.

Data-driven urban waterlogging risk management approach considering efficiency-equity trade-offs and risk mitigation capability evaluation

Because disaster reduction resources are always constrained, risk mitigation measures and policies need to be weighted toward efficiency or equity. Greater efficiency focuses on high-risk areas, and greater equity focuses on identifying additional potential risk areas. To address this efficiency-equity tradeoff decision, a data-driven urban waterlogging risk mitigation capability evaluation and improving framework was proposed for nonprofit operations and government bailouts. First, a novel evaluation index was defined, the F(α,β) score, to consider both precision and recall in the binary classification tasks and to seek an effective efficiency-equity trade-off, after which a two-person, zero-sum matrix game model was developed to calculate the α and β parameters and select the highest valued optimal model. Then, using this model, a risk probability map was generated for Wuhan, China, and data envelopment analysis was used to conduct a risk mitigation capability evaluation and identify the needed policy improvements. It was found that: (1) vulnerability was the primary risk-related factor, followed by adaptability and restorability; (2) more importance should be attached to equity than efficiency when implementing risk reduction capability evaluations, that is, authorities should reduce resource investments in extremely high-risk DEA-inefficient areas and identify a greater number of potential risk areas; (3) there were around 1.55% of extremely high-risk areas, which were mainly concentrated in the Jianghan and Wuchang districts and around 9% of high-risk areas, mainly located in the Hongshan district; and (4) northeastern and southwestern Jianghan district could be a valuable reference for urban waterlogging management and disaster reduction. However, excessive investment in transportation infrastructure and construction in DEA inefficient areas should be appropriately reduced.

Efficiency–equity trade-off in the Irish carbon tax: A CGE investigation of mixed revenue recycling schemes

The literature shows that earmarking carbon tax revenues to reduce other distortionary taxes can mitigate the tax’s adverse economic implications, whereas transferring revenues directly to households can reduce the tax’s negative equity implications. This paper employs a dynamic applied general equilibrium model to examine the inherent efficiency–equity trade-off in Irish carbon tax revenue recycling (RR). We analyse pure RR schemes, where total carbon tax revenues are allocated either to increased household transfers or to tax rate reductions and mixed schemes, which combine these two. The findings show that all tax reduction RR options can reduce emissions while increasing gross domestic product and welfare (creating a double dividend), but they also increase inequality. However, when sales tax reductions are combined with household transfers, increased efficiency and equity can be found, resulting in a triple dividend. This paper contributes to the literature by directly investigating the efficiency–equity trade-offs in detailed mixed RR schemes. From a policy perspective, we conclude that mixed RR options generate better outcomes as the government can directly balance efficiency and equity outcomes.

A spatial macroeconomic analysis of the equity-efficiency trade-off of the European cohesion policy

ABSTRACT In this study we use a spatial dynamic general equilibrium model to analyse the macroeconomic impact of cohesion policy-like investments in nine net beneficiary member states of the European Union. We examine whether or not the objective of reducing regional disparities (equity) prevents the interventions from maximising their impact on national GDP impact (efficiency) by looking at GDP multipliers and interregional spillovers. We find that there may be an equity-efficiency trade-off depending on the characteristics of both the investments made and the targeted regional economies. Moreover, the analysis shows that the growth spillovers from more developed to less developed regions are limited. This implies that, in order to reduce regional disparities, investment must be made in the less developed regions of each country.

Consumption Inequality and Product Fit: Equity-Efficiency Trade-offs in Goods Markets

Consumption Inequality and Product Fit: Equity-Efficiency Trade-offs in Goods Markets

OP44 Exploring The Disconnect In Relevant Outcomes For Health Technology Assessment-Related Economic Evaluation Relative To Care Commissioning: Implications For Resource Allocation

IntroductionOutcome-based commissioning – a set of arrangements to define and pay for a service based on pre-agreed outcomes – has been operationalized in some regional care settings (e.g., adult social care). However, it remains largely aspirational due to operational considerations and challenges. Outcomes-based commissioning shares a common goal with economic evaluation alongside health technology appraisal (HTA): to achieve value for money for outcomes from a finite budget.MethodsWe explored the considerations, implications, and challenges regarding the practical role of relevant outcomes in economic evaluation, relative to care commissioning, using England as a case study. Our exploration bridges a gap between economic evaluation evidence and practical resource allocation decision-making, focusing on conceptual (e.g., what are ‘relevant’ outcomes), practical considerations (e.g., quantifying and using relevant endpoints or surrogate outcomes alongside costs), and pertinent issues when linking these to commissioning based payment mechanisms.ResultsFirstly, there is a disconnect between existing economic evaluation approaches and commissioning processes. For example, using a single quality-adjusted life-year (QALY) maximum and limited consideration of affordability relative to cost effectiveness. Secondly, service-focused outcomes (e.g., seeing a specialist team) rather than person-focused outcomes (e.g., QALYs) are often desirable from a practical commissioning and service provider perspective as they make it easier to measure key performance indicators. Thirdly, both person- and service-focused payment structures could lead to market inefficiencies when activity is focused on only people for whom a prespecified outcome can be achieved or service delivered; these approaches require additional efficiency-equity tradeoff considerations (e.g., using distributional cost-effectiveness analyses).ConclusionsWe highlight payment structures as a major and complex consideration for commissioning, for which economic evaluation provides little to no consideration. Service-related outcomes and payments can be used as surrogate outcomes within economic modeling frameworks, while monitoring and evaluation can still be based on economic outcomes (e.g., QALYs and aggregated costs). Accounting for and explaining direct links from payment structures to economic outcomes is a major step to bridging a gap between economic evaluation evidence and practical resource allocation.

Equity and Efficiency in Dynamic Matching: Extreme Waitlist Policies

Waitlists are commonly used to allocate scarce resources, such as public housing or organs. Waitlist policies attempt to prioritize agents who wait longer by assigning them priority points (à la first come, first served). We show that such point systems can lead to severe inequality across the agents’ assignment probabilities unless they use randomization. In particular, deterministic point systems lead to a more unequal allocation than any other rule that prioritizes earlier arrivals, an axiom that ensures that agents who wait longer are treated (weakly) better. Among the policies abiding by this axiom, we show that service in random order (SIRO) leads to the most equal allocation. From a utilitarian perspective, we show that the planner faces no trade-off between equity and efficiency when the flow utility from waiting is nonnegative or negative and increasing over time. In these cases, SIRO is also the most efficient policy. However, when the flow cost of waiting increases over time, then the planner may face an efficiency–equity trade-off: SIRO remains the most equitable policy but may not be the most efficient one. This paper was accepted by Omar Besbes, revenue management and market analytics.

The effect of fast and slow decision-making on equity-efficiency tradeoffs and moral repugnance.

Fast-and-slow models of decision-making are commonly invoked to explain economic behaviour. However, past research has focused on human cooperation and generosity and thus largely overlooked situations where there are sharp conflicts between efficiency and equality, or between efficiency and more intuitive moral values (repugnance). Here, we contribute to fill this gap in the literature. We conducted a preregistered experiment (n = 1500 recruited from Prolific) to assess the effects of fast, intuitive decisions, under time pressure versus slow, deliberate decisions, under time delay, on (i) people's distributional preferences and (ii) their attitudes toward repugnant transactions. The results show increased preference for equality and decreased preference for efficiency under time pressure, but no effects on moral repugnance. Exploratory analyses revealed that most of the observed treatment effects in our data were accounted for by women. Our results provide some support for theories that associate controlled cognition with concern for efficiency, and intuitive, emotional responses with inequality aversion.

The equity–efficiency trade-off and the intensity of COVID-19 pandemic government responses: evidence from US states

ABSTRACT The relation between equity and efficiency remains at the heart of regional policy. This study captures the effect of the COVID-19 pandemic government responses on the above-mentioned relation. To do so, we employ cross-sectional data from US states for 2020 and a spatial econometric model specification in the context of Corona policy effects. We find an inverted-‘U’ relationship between inequality and efficiency. Additionally, the effect of the intensity of government responses to COVID-19 on the equity–efficiency relation depends on the state’s per capita gross domestic product (GDP) levels.

Popular Support for Balancing Equity and Efficiency in Resource Allocation: A Case Study in Online Advertising to Increase Welfare Program Awareness

Algorithmically optimizing the provision of limited resources is commonplace across domains from healthcare to lending. Optimization can lead to efficient resource allocation, but, if deployed without additional scrutiny, can also exacerbate inequality. Little is known about popular preferences regarding acceptable efficiency-equity trade-offs, making it difficult to design algorithms that are responsive to community needs and desires. Here we examine this trade-off and concomitant preferences in the context of GetCalFresh, an online service that streamlines the application process for California’s Supplementary Nutrition Assistance Program (SNAP, formerly known as food stamps). GetCalFresh runs online advertisements to raise awareness of their multilingual SNAP application service. We first demonstrate that when ads are optimized to garner the most enrollments per dollar, a disproportionately small number of Spanish speakers enroll due to relatively higher costs of non-English language advertising. Embedding these results in a survey (N = 1,532) of a diverse set of Americans, we find broad popular support for valuing equity in addition to efficiency: respondents generally preferred reducing total enrollments to facilitate increased enrollment of Spanish speakers. These results buttress recent calls to reevaluate the efficiency-centric paradigm popular in algorithmic resource allocation.

EE217 Efficiency-Equity Trade-Offs in Cost-Effectiveness Analyses: An Umbrella Review of Previous Systematic Literature Reviews

Cost-effectiveness analyses (CEA) are important in healthcare decision-making and resource allocation for assessing costs and benefits of new treatments in terms of clinical efficiency. Expanding value elements, such as health equity, for new technologies in traditional CEAs has attracted interest. This study synthesized evidence on how equity concepts were considered in modified CEAs by conducting an umbrella review of systematic literature reviews (SLR).

Evaluating the equity impact and cost-effectiveness of digital adherence technologies with differentiated care to support tuberculosis treatment adherence in Ethiopia: protocol and analysis plan for the health economics component of a cluster randomised trial

BackgroundTuberculosis remains a leading infectious cause of death in resource-limited settings. Effective treatment is the cornerstone of tuberculosis control, reducing mortality, recurrence and transmission. Supporting treatment adherence through facility-based observations of medication taking can be costly to providers and patients. Digital adherence technologies (DATs) may facilitate treatment monitoring and differentiated care. The ASCENT-Ethiopia study is a three-arm cluster randomised trial assessing two DATs with differentiated care for supporting tuberculosis treatment adherence in Ethiopia. This study is part of the ASCENT consortium, assessing DATs in South Africa, the Philippines, Ukraine, Tanzania and Ethiopia. The aim of this study is to determine the costs, cost-effectiveness and equity impact of implementing DATs in Ethiopia.Methods and designA total of 78 health facilities have been randomised (1:1:1) into one of two intervention arms or a standard-of-care arm. Approximately 50 participants from each health facility will be enrolled on the trial. Participants in facilities randomised to the intervention arms are offered a DAT linked to the ASCENT adherence platform for daily adherence monitoring and differentiated response for those who have missed doses. Participants at standard-of-care facilities receive routine care. Treatment outcomes and resource utilisation will be measured for each participant. The primary effectiveness outcome is a composite index of unfavourable end-of-treatment outcomes (lost to follow-up, death or treatment failure) or treatment recurrence within 6 months of end-of-treatment. For the cost-effectiveness analysis, end-of-treatment outcomes will be used to estimate disability-adjusted life years (DALYs) averted. Provider and patient cost data will be collected from a subsample of 5 health facilities per study arm, 10 participants per facility (n = 150). We will conduct a societal cost-effectiveness analysis using Bayesian hierarchical models that account for the individual-level correlation between costs and outcomes as well as intra-cluster correlation. An equity impact analysis will be conducted to summarise equity efficiency trade-offs.DiscussionTrial enrolment is ongoing. This paper follows the published trial protocol and describes the protocol and analysis plan for the health economics work package of the ASCENT-Ethiopia trial. This analysis will generate economic evidence to inform the implementation of DATs in Ethiopia and globally.Trial registrationPan African Clinical Trial Registry (PACTR) PACTR202008776694999. Registered on 11 August 2020, https://pactr.samrc.ac.za/TrialDisplay.aspx?TrialID=12241.

Suspending Suspensions: The Education Production Consequences of School Suspension Policies*

Abstract Managing student behaviour is integral to the education production process. We study the trade-offs of school suspension policies by modelling and estimating how changes in school suspension policies causally impact student performance and teacher turnover. Our results indicate that the reduction in suspension rates in the Los Angeles Unified School District decreased math and English test scores, decreased grade point averages and increased absences. Teacher turnover also increased, particularly for inexperienced teachers. We also document an efficiency-equity trade-off: while achievement decreased for most students in the district, the highest-risk students experienced moderate gains in achievement.

Optimal redistribution behind the veil of ignorance

We propose a formalization of the Difference Principle (maximin) by which Rawls’ contribution is shown to go beyond distributive value judgments in such a way as to embrace efficiency issues as well. In our model, inequalities are shown to be permitted as far as they stimulate a greater effort in education (or training), and so economic growth. This is the only possibility for an income disparity to be unanimously accepted by both the most-, and above all, the least-advantaged individual. In this vein, we highlight the peculiarity of the Rawlsian equity-efficiency trade off behind the veil of ignorance. Finally, by recalling the old tradition of ‘universal ex-post efficiency’, we identify the set of Rawls-optimal social contracts, which is shown to be a subset of Pareto-optimal ones.

The Equity-Efficiency Trade-Off in the Presence of Distorting Taxation

The Equity-Efficiency Trade-Off in the Presence of Distorting Taxation

Electricity Tariff Design via Lens of Energy Justice

Distributed Energy Resources (DERs) can significantly affect the net social benefit in power systems, raising concerns pertaining to distributive justice and equity. Electricity tariff and DERs share a symbiotic relationship whereby the design of the former directly impacts the economic efficiency and equity in the system. Current tariff design approaches suffer from opaque efficiency-equity trade-offs and are also agnostic of the externalities that affect both economic efficiency and equity. Therefore, this paper develops a justice-cognizant tariff design framework that improves the operational savings in the system without sacrificing distributional equity, and encompasses economic welfare, social costs of environmental and public health impacts, and socio-economic and demographic characteristics of electricity consumers. The proposed framework is based on a Single Leader Single Follower (SLSF) game incorporating a multi-objective optimization problem, and is evaluated on four different tariff structures. The SLSF game is reformulated as a Multi-Objective Problem with Equilibrium Constraints (MOPEC) and is solved by integrating the objective sum method for multi-objective optimization and Scholtes’s relaxation technique for equilibrium constraints. We compare the operational savings and equity of the proposed framework using the 11-zone New York ISO and 7-bus Manhattan power networks. The results demonstrate that justice-cognizant, and spatially- and temporally-granular tariffs ensure equity and increase the operational savings at a lower energy burden to consumers.

On the equity-efficiency trade-off in food-bank network operations

In this paper, we present a novel modeling perspective to the food-bank donation allocation problem under equity and efficiency performance measures. Using a penalty factor in the objective function, our model explicitly accounts for both efficiency and equity, simultaneously. We give the tightest lower and upper bounds of the penalty factor, which can conveniently characterize closed-form optimal solutions for the perfect efficiency and perfect equity cases. Testing our model on the full spectrum of our penalty factor, using real data from Feeding America, we demonstrate that the solutions from our model dominate those of a benchmark from the literature in terms of both equity and efficiency, being on the Pareto frontier. Our sensitivity analysis demonstrates that assisting the food-banks should go hand-in-hand with helping eliminate poverty in the demand population. This will ensure that adding more capacity to the network will always lead to a decrease in the price of equity for the food-banks. On the other hand, our results reveal that encouraging charitability is always beneficial for the food-banks, albeit with diminishing returns. Finally, we extend our model to the case with stochastic receiving capacities and derive additional insights with regards to the inherent trade-offs between equity, efficiency, and reliability in the network.