Welfare Gap Research Articles

Welfare Effects of Congestion Pricing and Transit Services in Multiclass Multimodal Networks

This paper analyzes the welfare effects of congestion pricing with the use of a general bimodal network with heterogeneous users. Transit service is modeled as a cheaper (because of its lower operating cost) and undesirable (because of the relatively long travel time) alternative to the highway network and is added to an origin–destination pair as an exclusive link. The analysis characterizes the critical users—those who suffer the greatest loss from pricing—as those who experience the least change in travel time after pricing. Accordingly, the paper shows that critical users could be rich, poor, or middle class, depending on their origin and destination. This finding highlights the spatial heterogeneity of distributional effects. Furthermore, numerical experiments indicate that (a) those with a low value of time tend to benefit more from greater coverage of transit services than those with intermediate values of time; (b) in the presence of poor transit coverage, users with access to transit may share a disproportionally greater burden for the congestion relief generated by an optimum toll for the system; and (c) the optimum toll for the system generally leads to a welfare gap between the rich and the poor larger than those of toll schemes that have proportionally lower magnitudes and achieve smaller efficiency improvements.

Determinants of Immigrants' Cash-Welfare Benefits Intake in Spain

Much of the literature on immigrants' cash-welfare benefits use has focused on countries with a large tradition of receiving immigrants and with well established Welfare states. This paper contributes to this literature by analyzing differences in cash-welfare benefits receipt between immigrants and natives and their determinants in Spain, a country with: (1) a small level of social assistance and a Welfare state heavily reliable on conditioned access to pensions; and (2) an unprecedented immigration boom. Different probit models of social program intake are estimated for immigrants and native-born individuals using pooled cross-sectional data from the 1999 to 2009 Spanish Labor Force Survey. Results show that a negative residual welfare gap exists and that it is mainly driven by recently arrived immigrants, whose legal status or insufficient contribution is likely to hamper participation in social programs. In addition, I find that immigrants with more than 5 years in the host country are more likely to receive unemployment benefits than natives, consistent with findings in other countries. These findings hold regardless of immigrants' continent of origin.

Productivity and the Welfare of Nations

This paper shows that thewelfare of a country's representative consumer can be measured using just two variables: current and future total factor productivity and the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare differences across countries. The result holds regardless of the type of production technology and the degree of market competition. It applies to open economies as well, if total factor productivity is constructed using domestic absorption, instead of gross domestic product, as the measure of output. It also requires that total factor productivity be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates and they will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of developed countries with high-quality total factor productivity and capital data. Under realistic scenarios, the U.K. and Spain had the highest growth rates of welfare during the sample period 1985-2005, but the U.S. had the highest level of welfare.

Sectoral labor adjustment and monetary policy in a small open economy

This paper studies the welfare implications of sectoral labor adjustment cost in a two-sector small open economy model with sticky prices. We find that, when the economy faces external shocks, if monetary policy can stabilize the real economy, then sectoral labor market adjustment cost will lead to welfare loss. However, if monetary policy such as fixed exchange rates cannot stabilize real variables, then some degree of labor market friction will improve welfare instead and the gain will be significant. As a result, the welfare gap between flexible exchange rates and fixed exchange rates decreases with sectoral labor market friction. This is because the friction can offset some of the nominal rigidity and become a substitute for monetary policy to stabilize the real economy.

Sectoral Labor Adjustment and Monetary Policy in a Small Open Economy

This paper studies the welfare implications of sectoral labor adjustment cost in a two-sector small open economy model with sticky prices. We find that, when the economy faces external shocks, if monetary policy can stabilize the real economy, then sectoral labor market adjustment cost will lead to welfare loss. However, if monetary policy such as fixed exchange rates cannot stabilize real variables, then some degree of labor market friction will improve welfare instead and the gain will be significant. As a result, the welfare gap between flexible exchange rates and fixed exchange rates decreases with sectoral labor market friction. This is because the friction can offset some of the nominal rigidity and become a substitute for monetary policy to stabilize the real economy.

Immigrant-Native Differences in Welfare Participation: The Role of Entry and Exit Rates

We analyze differences in welfare transitions between natives and immigrants in Sweden using a large representative panel data set. The data contain administrative information on welfare use and detailed demographic information. The empirical results suggest that the main reason for the large immigrant–native welfare gap observed is the differences in welfare entry rates. Thus, policies aimed to reduce these transitions may be particularly successful in reducing welfare use in general and particularly the immigrant–native welfare gap.

Restricted carbon emissions and directed R&D support; an applied general equilibrium analysis

We analyse welfare effects of supporting general versus emission-saving technological development when carbon emissions are regulated by a carbon tax. We use a computable general equilibrium model with induced technological change (ITC). ITC is driven by two separate, economically motivated research and development (R&D) activities, one general and one emission-saving specified as carbon capture and storage (CCS). We study public revenue neutral policy alternatives targeted towards general R&D and CCS R&D. Support to general R&D is the welfare superior. However, the welfare gap between the two R&D policy alternatives is reduced with higher carbon tax levels. For sufficiently high levels of the carbon tax equal subsidy rates are preferred.

Regional cooperation in the Baltic Sea Region—recommendations to foster a joint understanding and take action against common risks and threats

It is in our common interest to protect and promote democracy, security, and the rule of law in the Baltic Sea Region. These are among the fundamental conditions for a fair and prosperous social and economic development. It is also in our common interest to repel the threats against our civil security. National and international security today is not just a question of an absence of military threats, but to a growing extent a transnational presence of stable democratic, political, economic, social, and infrastructural conditions. The threats against society are manifold: natural disasters, environmental degradation, political, social and infrastructural vulnerabilities, organized crime, corruption, poverty, welfare gaps, social marginalization, uneven living conditions, ideological fanaticism, etc. The threat of a confrontation with military means has all but vanished, although it has not disappeared entirely. Take organized crime as an example: Organized crime is growing and eating its way into society’s fabric. It is evident in the detestable trafficking in human beings, in the narcotics trade, in the recurrent corruption scandals, and in many other ways. Organized crime undermines the security and safety of the citizens. It corrodes the legal and administrative foundation of society. It distorts the free function of the market mechanisms. It corrupts politics. Organized crime is, therefore, a fundamental threat against freedom and democracy. Civil security requires a comprehensive assessment of threats and risks, which includes everything from nonintentional to intentional threats. It is also a matter of developing and adapting new means of prevention and response, in which the combined resources of society are prepared for various scenarios. Not least, civil security is a question of safeguarding the principles, functions, and institutions of the open and democratic society, while concurrently strengthening the security and Asia Eur J (2010) 8:267–269 DOI 10.1007/s10308-010-0267-6

Labor Force Participation, Regional Location, and Economic Well-Being of Single Mothers in Russia

This paper tests the contribution of increased labor market participation to a substantial narrowing of the gap in material welfare between two parent and single mother households in Russia in the period 1996–2003. Decomposition analysis employing the technique of Juhn et al. (Accounting for a slowdown in black–white wage convergence, Kosters (ed), 1991) and data from the Russian Longitudinal Monitoring Survey shows that increased labor market participation explains about one-third of the narrowing of the welfare gap. Changes in the regional distribution of single mother households, specifically increasing concentration in Moscow and St Petersburg, have proved critical because of the higher wages available in these cities. Thus quality of employment has been as important as increased participation in the labor market.

Dynamics of the North– South welfare gap and global sustainability

The vast heterogeneity among nations in terms of economic and demographic characteristics is evident, despite being overlooked in some global studies. In this heterogeneity, it is possible to identify some distinct aggregate classes differing at some very fundamental level: developing ( South) nations and developed ( North) nations may have very different, asymmetric problems, goals and structures. This study investigates these two distinct groups of socio-economic systems, as they interact in a context of global sustainability. We identify population, economic growth, welfare gap, energy supply and pollution as key issues and analyze them using a systems perspective. A dynamic feedback model, which discriminates the two groups of nations, is constructed to study the dynamics of variables related to the above key issues. The model is tested using extensive data between the years 1980–2005. According to the reference behavior covering the period 1980–2050, it is not viable to close the welfare gap between North and South, given the current prevailing non-renewable-resource-based growth system. A non-renewable-resource-based system adopted by the economic system of growing South would take the global system even closer to its limits. It is observed that indicators like reserve-to-demand ratio fail to provide reliable signals for a timely transition to alternative resources, and a very serious economic recession due to resource scarcity is likely to develop in the next couple of decades. By coupling the demographic and economic dynamics, it is shown that an economic slowdown due to a resource scarcity may have a dramatic widening effect on the already existing welfare gap. Scenario and policy experiments verify the widely accepted importance of stabilizing the population growth in South, transition to alternative energy resources, and investment support to the South in this transition simultaneously in order to reduce the welfare gap between the two blocks. It is observed that enthusiastic targets for an energy transition may have a serious negative impact on the welfare level experienced in South, whereas an energy transition in South supported by North seems to have the most desirable outcome regarding the welfare gap.

Economic liberalization and urban–rural inequality in India: a quantile regression analysis

We examine India’s urban–rural inequality in welfare in 1993–1994 and 2004, a period which coincides with the country’s economic liberalization reforms and rapid economic growth. Using real monthly per capita household consumption expenditure as our measure of welfare, we estimate quantile regressions to analyze the urban–rural welfare gap across the entire welfare distribution. While the urban–rural welfare gap was fairly convex across the welfare distribution in 1993–1994, it became more concave in 2004, with the gap narrowing for the lowest and highest quintiles and widening for the middle three quintiles. The urban–rural gap in returns to all levels of education widened substantially for the bottom four quintiles but became increasingly negative for the top quintile. Applying the Machado and Mata (J Appl Econom 20:445–465, 2005) decomposition technique to decompose the urban–rural welfare gap at each percentile, we find that for the bottom 40% of the distribution, differences in the distribution of covariates became less important while differences in the distribution of returns to covariates became more important in explaining the gap. The opposite was true for the top 40% of the distribution. Our analysis suggests that while the rural poor appear to be catching up with their urban counterparts in terms of labor market characteristics, ten years of economic reforms have intensified the urban–rural gap in returns to these characteristics. On the other hand, the rural rich lag even further behind the urban rich with respect to their labor market characteristics even though the urban–rural gap in the returns to these characteristics has diminished during the reform period. Future efforts to generate urban–rural equality may require policies that seek to equalize returns to labor market characteristics between the two sectors at the lower half of the distribution and improve rural labor market characteristics at the top half of the distribution.

Carrying cost of money and real effects of denomination structure

This paper provides an explanation for the nature of the real effects of denomination structure using parameterized versions of a search-based model. We show that the carrying cost of money incurs the distortionary effect on output and the adverse distributional effect on welfare. With monetary expansion, average propensity to consume increases more rapidly in a single denomination than in multiple denominations due to the distortionary effect, and the welfare gap between them is augmented due to both distortionary and adverse distributional effects. The implication of these effects for modern economies is that a binary-decimal structure adopted by the EU and the US is superior to a decimal-pair structure adopted by Japan and South Korea.

Reflections On Societal Change, Adjustments, and Responses

Building on Davis (1963) and subsequent work, we propose a conceptual framework that provides a guide for the organization of empirical demographic research. Our approach is based on the notion that changes in nuptiality, fertility, and migration are not objectives in and of themselves, but means for reducing welfare gaps - defined as the gaps between actual welfare and that which could be attained with altered demographic and/or other behavior. We clarify theoretical issues concerning three levels of analysis. At the highest level, societal change leads to welfare gaps for families and/or individuals. In turn, behavioral adjustments are made to reduce these gaps. Finally, demographic responses at the community level result when large numbers of families and/or individuals adjust behavior in a particular manner. We consider and exemplify relationships among demographic and other responses in historical, agricultural contexts.

Countercyclical Taxation and Price Dispersion

In this paper, we explore the benefits from a supply-side oriented fiscal tax policy within the framework of a New Keynesian DSGE model. We show that countercyclical tax rules, which are contingent on the observed welfare gap or alternatively on the markup shock and levied on value added, reduce remarkably the inverse impact of cost push shocks. We state that the tax rule establishes a path for the evolution of marginal cost at the firm level that largely prevents built up of price dispersion. We highlight that this tax policy is also effective under a balancedbudget regime. Hence, fiscal policy can disencumber monetary policy in the light of cost push shocks.

Household structure and consumption insurance of the elderly

This paper examines the role of household formation in providing consumption insurance to the elderly. Using data from the Consumer Expenditure Surveys, raw tabulations of per adult equivalent consumption indicate that the elderly who live alone have higher levels of well-being relative to those who live with others. This is misleading, however, because the decision to live alone is clearly endogenous. The empirical estimation accounts for this endogeneity using data from the Panel Study of Income Dynamics. The results provide evidence that household formation plays a significant role in maintaining consumption levels. Without the opportunity to live with others, the welfare gap measured by the difference between per adult equivalent consumption levels of dependent and independent livers would be even larger. These findings suggest that co-residing with others effectively supplements social security, pensions, and private savings and helps the elderly to smooth consumption in old age.

Narrowing the welfare gap: Policing children and young people in the wake of Every Child Matters

This article analyses policy changes in policing and child welfare and discusses the dilemmas faced by the police in respect of policing juveniles in a post‐Every Child Matters multi‐agency landscape. It will argue that in a climate where concern with social control appears to eclipse a concern with child welfare and a lack of clarity for the police and the increasing dependence on managerialistic processes, more children and young people may be drawn into the youth justice system.

Globalization, International Finance, and Political Islam in the Arab World

This article looks at one important aspect of globalization in the Arab World, namely the provision of international finance by the US, the International Monetary Fund (IMF), and the World Bank in support of economic liberalization programs. This flow of international finance has been partly determined by geopolitical factors and in some countries has resulted in a decline in state provision of social welfare, increased poverty, and increased inequality. Not only has this form of globalization been increasingly challenged by Islamist groups, but many such groups have moved in to provide social capital and fill the welfare gap created by the gradual withdrawal of the state from socio-economic affairs. Globalization has thus strengthened the hand of political Islam and undermined the political legitimacy of incumbent regimes.

Social Security in Hungary: A Balance Sheet after Twelve Years

The social and political transformation in Hungary contributed to the development of a democratic political system and to the establishment of the rule of law and a market economy. The process was accompanied by a series of economic and social problems. The paper first reviews the social policy orientation of the three free consecutive governments elected since the transition. None of them has had a clear political profile: they have constituted mixed and unclear welfare regimes. None of them has sketched a clear welfare policy except perhaps the current government. In its case central redistribution is consistently biased in favour of the middle and upper strata at the expense of the poor. Instead of a consensual plan defining priorities, decisions and reforms in the last ten years have been motivated by political interests, at hoc ideas, and authoritarian rulings. The paper next shows what reform meant in the case of the different instruments and various fields of social policy, namely unemployment, health, pensions, family benefits and social assistance. It concludes that while both the inherited and the newly created systems had contributed to alleviate the shocks of the transition, yet there never was enough political will to give sufficient or adequate help to those needing it. As a consequence of the “reforms” public expenditures have been significantly reduced. The welfare gap between East and West has thereby grown. The consequence is that the country has become gravely divided, and that poverty is greater and deeper than it might have been under a different set of policies.

The European Union's Eastward Enlargement

In July 1997 the Commission of the European Union presented its Agenda 2000. This document not only suggested to start accession talks with some East and Central European countries (CEEC) in early 1998 but it also provided proposals for a restructuring of EU expenditures. On this background this contribution discusses the state of readiness of the Central and East European countries to become EU members over the next few years and the Union's capacity to absorb up to ten CEEC over the next decade or so. This study concludes that the European Union has become an anchor of stability to the CEEC that guarantees both democracy and economic security - much more than could be expected only a couple of years ago. The Union's readiness to accept the membership of CEEC has, in a decisive way, contributed to their societal, political and economic stabilization. There is almost a contest among the CEEC on which one is going to meet the accession criteria first and best. The enlargement process, however, is connected to problems the resolution of which realistically postpone its successful conclusion at least into the year 2005. The main reasons are (1) the welfare gap between the EU area and the CEEC, (2) the need for more institutional and economic changes in the CEEC to make them ready for acces-sion, and, most importantly, (3) the necessity for the European Union to prepare herself for accession by a comprehensive financial reform and fundamental institutional changes.

Public Sector Procurement: Lump-Sum payments or Optimal Contracts?

In a Dynamic setting, we compare procurement schemes in the form of a lump-sum payment with an optimal information-revealing menu of contracts without commitment. We find that lump-sum contracts generate two benefits. First, they always provide optimal levels of effort. Second, they 'tie the hands' of the producer, and avoid the ratchet effect. These benefits must be weighted against the costs of higher rent in the second period. For a low discount factor such costs dominate, but for a high discount rate, when the ratchet effect becomes acute, the welfare gap becomes small and lump-sum payments may even welfare-dominate an optimal menu.