Lower Welfare Research Articles

Fair Utilitarianism

Utilitarianism plays a central role in economics, but there is a gap between theory, where utilitarianism is dominant, and applications, where monetary criteria are often used. For applications, a key difficulty is to define how utilities should be measured and compared. Drawing on Harsanyi’s (1955) approach, we introduce a new normalization of utilities ensuring that: (i) a transfer from a rich population to a poor population is welfare enhancing, and (ii) populations with more risk-averse people have lower welfare. We study some implications of this “fair utilitarianism” for risk sharing, collective risk aversion, and the design of health policy. (JEL D63, D81)

Effect of low and high concentrate supplementation on health and welfare indicators in different breeds in small-scale mountain dairy farms.

We investigated and compared the effects of low and high concentrate supplementation in terms of animal welfare, health and reproductive performance in two different dairy cow breeds on small-scale mountain farms. 64 South Tyrolean dairy farms were evaluated using an on-farm assessment for animal-based and resource-based welfare indicators, data from test day records, and a questionnaire for the farmer. Farms were divided into four groups: low input Tyrolean Grey (L-TG), low input Brown Swiss (L-BS), high input Tyrolean Grey (H-TG) and high input Brown Swiss (H-BS). Effects of intensity level, breed and their interaction were calculated and analyzed statistically. The predominant husbandry system across all groups was tie-stall. The average energy-corrected milk yield increased with increasing concentrate level, with L-TG showing the lowest and H-BS showing the highest milk yield. Age at first calving was lowest in H-BS when compared to all other systems, while numbers of lactations were higher in L-TG compared to H-BS. Feed efficiency (percentage of milk out of roughage) was significantly higher in L-TG and L-BS when compared to H-TG and H-BS. L-BS showed the poorest results for most of the welfare indicators such as lean cows, lesions and percentage of dirty animals. In conclusion, a higher concentrate level in diets does not lead automatically to lower animal welfare for dairy cows in alpine regions. Indeed, keeping high yielding breeds in extensive systems seems to be challenging. The dual-purpose breed TG showed some clear advantages in that calving interval was lower and the number of lactations greater.

Policy analysis for emission-reduction with green technology investment in manufacturing

Different environmental policies create different incentives for emission reduction. The paper examines the effect of two environmental policies, the emission abatement subsidy and emission tax policies, on a market with manufacturer investment in a green technology to reduce emission. Compared to environmental taxation, the results show that the subsidy policy offers a greater incentive to abate emission and yields higher industry profit. However, regarding social welfare, the subsidy policy leads to lower social welfare and environmental performance than the tax policy when emission is highly damaging to the environment and emission abatement is sufficiently costly. From the industrial perspective, increasing technological efficiency is not necessarily beneficial even if it is costless as the government will adjust the environmental policy accordingly for social welfare optimization, may at the manufacturer’s expense. Finally, extensions considering a combined policy (both subsidy and tax), a multiplicative emission cost function, and the problem in a supply chain context are performed to check the robustness of the results.

Entrepreneurship as a Mechanism to Strengthen Rural Communities

Entrepreneurship has positioned itself as one of the main goals of both public and private agencies. This topic has been linked to urban areas population, marginalizing different groups and sectors, including the inhabitants of the rural areas have been included, which, usually considered by their lower income and social welfare, due to their inability to access sources of employment and services. Then, this research parts from a theoretical review of rural entrepreneurship and subsequently, explores the results from the application of a research instrument, focused on the perception of a group of rural tourism entrepreneurs was measured about the scope of their projects, pointing out the faced barriers and the gains that have been produced in their communities.

Optimal decisions for competitive manufacturers under carbon tax and cap-and-trade policies

With the gradual increasing of deepening of people's understanding of sustainable development, governments and enterprises have come to attach great importance to carbon emissions. Cap-and-trade (C&T) and carbon tax policies are widely regarded as two effective mechanisms for reducing carbon emissions. In this paper, considering consumer environmental awareness (CEA), we study the carbon emission reduction (CER) of two competitive manufacturers given the carbon tax and C&T policies. The two manufactures have two competitive behaviors: Cournot and Collusion. Four models are respectively constructed for different behaviors and policies, and the optimal decisions are obtained. Furthermore, comparison of the optimal solutions and parametric sensitivity analysis are discussed under two scenarios. The results indicate that the C&T policy is more sensitive to CEA than is the carbon tax policy. When manufacturers improve the efficiency of CER, compared with carbon tax policy, the C&T policy can more effectively curb carbon emissions, improve social welfare, and enhance the competitiveness of manufacturers. The fiercer CER competition leads to lower emissions and social welfare but higher total carbon emissions. The manufacturers' collusion behavior cannot make them achieve a win–win situation.

Frictions in an Experimental Dynamic Stochastic General Equilibrium Economy

AbstractWe construct experimental economies, populated with human subjects, with different institutional features that have a structure and incentives similar to a dynamic stochastic general equilibrium model. An experimental economy with monopolistic competition and no menu costs generates empirical patterns that are closer to the U.S. economy than simulations or the other experimental environments. We observe greater welfare and output in a setting where goods are perfect substitutes compared to treatments with monopolistic competition. Discretionary human central bankers produce lower output and welfare compared to an automated instrumental rule. Menu costs reduce inflation volatility.

Welfare implications of trade liberalization when revenue matters

ABSTRACT Some empirical studies have shown that many developing economies were unable to recover lost trade revenue from domestic taxes after implementing trade liberalizing policies. Ignoring the fiscal cost of trade liberalization when government spending is not completely wasteful may lead to misleading welfare estimates. We address these concerns by developing a model in which government spending augments the production function, enabling it to account for the role of revenue and its impact on welfare. The model is calibrated to capture the features of the Ghanaian economy. We find significant but lower welfare effects of trade liberalization when government spending on infrastructure plays an important role in the production process. The lower welfare impact of trade liberalization is explained by a decline in infrastructure spending caused by shortfalls in revenue emanating from tariff cuts. The implication of the study is that there are further welfare gains to trade liberalization but such gains are significantly reduced when fiscal costs are high. The role of revenue matters in evaluating the welfare implications of trade liberalization.

Business Friendliness: A Double-Edged Sword

In this paper, we test the hypothesis that business-friendly local-government policies combined with weak legal institutions lead to lower economic welfare in the form of greater fraud activity. Using data of almost 3000 failed peer-to-peer (P2P) lending platforms in China, labeled as “runaways”, we find that they are more prevalent in provinces with business-friendly policies with weak law-enforcement regimes.

Rent dissipation and administration of mining rent-seeking activities in resource-rich regions

As non-productive activities, rent-seeking behaviors in the exploitation and utilization of mineral resources in resource-rich regions can not only bring about rent dissipation and the waste of social resources, but also lead to the unfair income distribution and lower social welfare. Based on the location quotient and Nelson’s method, this thesis identified coal-rich regions in China, decomposed the rent dissipation in mining rent seeking into social welfare net loss and rent-seeking cost, and analyzed the influencing factors. The conclusion shows that these resource-rich regions have prominent rent dissipation problems in the large-scale development of coal resources. The rent dissipation is mainly represented by the cost of rent seeking in the form of Tullock quadrilateral, which is highly correlated with the economic scale and resource-dependent economic development model. The improved marketization helps to reduce the loss of social welfare caused by rent seeking. On this basis, this thesis proposes corresponding countermeasures and suggestions to reform the taxation system of resource and environment, to establish a long-term mechanism for residents’ sustainable income increase, to deconstruct the system of resource property rights, and to improve the system of supervision, etc.

Cross-ownership and portfolio choice

Cross-ownership smooths firms' idiosyncratic shocks but affects their portfolio choice and, therefore, their risk-taking position. The classical intuition on the role of pooling risk in raising welfare is valid when ownership is evenly dispersed. However, when the ownership of some firms is concentrated in the hands of a few others, deeper integration leads to excessive risk-taking and volatility and, consequently, it results in lower aggregate welfare.

Strategic Trading, Welfare and Prices with Futures Contracts

Derivatives contracts are designed to improve risk sharing in financial markets, but among them, forwards, futures and swaps often appear redundant with their underlying assets: buying the asset and storing it is equivalent to buying it later. I show that imperfect competition in a dynamic market creates an incompleteness, opening gains from trading futures; but surprisingly, in equilibrium, agents trading these contracts have lower welfare than without futures. To mitigate their price impact, buyers (sellers) of an asset postpone profitable trades, exposing themselves to upward (downward) future spot price movements: buyers (sellers) would like to buy (sell) futures. However, when futures are introduced, traders also want to influence the spot price at futures maturity to increase futures payoff: this leads buyers (sellers) to sell (buy) futures. Moreover, despite the absence of market segmentation that would preclude arbitrage, the futures price can be above or below the spot price.

Is Gender Destiny? Gender Bias and Intergenerational Educational Mobility in India

Many recent studies provide evidence of gender bias against girls in India, for example, in health, education expenditure, breast feeding, and sex selection. In contrast, the gender gap in schooling has narrowed substantially over the decades. Does gender convergence in schooling attainment imply that the girls in the younger generation in India enjoy equal educational opportunities as the boys? To analyze this question, we study intergenerational schooling persistence addressing both empirical and theoretical challenges. We incorporate gender bias against girls in the family, school and labor market in a Becker-Tomes model and derive mobility and investment equations that can be taken to data. Parents may underestimate a girl's ability, expect lower returns, and assign lower welfare weights (“pure son preference”). The model delivers the widely used linear conditional expectation function (CEF) for mobility under constant returns but generates strong predictions: parental bias cannot cause gender gap in relative mobility. With diminishing returns, the CEF is concave, and parental bias affects both relative and absolute mobility. Since coresidency causes severe underestimation of the gender gap, we use data from India Human Development Survey that includes nonresident children and parents. Evidence rejects the linear mobility CEF in favor of a concave relation (both rural and urban). The daughters of uneducated fathers face lower relative and absolute mobility irrespective of rural/urban location. We find gender equality in absolute mobility for the children of college educated fathers in urban areas, but not in villages. Theoretical insights help understand the mechanisms, suggesting underestimation of academic ability and unfavorable school environment for girls. Rural parents exhibit pure son preference. Differences in the incidence of unwanted girls and the impact of parental nonfinancial inputs explain the rural-urban differences. The standard linear model misses important heterogeneity and yields misleading conclusions such as no son preference in rural India.

Dependence of public health on energy consumption: a cross-regional analysis

The authors test the hypothesis that there is a link between the consumption of non-renewable resources of the leading economies in the European region in terms of value-added industry and health. They performed a ranking correlation analysis on key indicators of population health and volumes of consumption of renewable and non-renewable resources in individual countries. The researchers assumed a slight relationship between the rate of healthy years of life and the production of renewable energy resources, making a positive contribution to the country’s environmental situation. Among the compared countries, those characterized by high consumption of primary energy resources are proportionally more productive and renewable energy resources. The analysis shows that differences in the health indicators of the regions’ population cause other more important factors than the studied ones. Some dependencies can be seen in analyzing the causes of death among the population of countries, for example, by cardiovascular diseases. The risk factor for this illness is air pollution caused by excessive consumption of non-renewable energy resources. The authors recommend considering the indicator of ecological footprint in the ratings of life quality in the regions. Compared to countries with lower welfare rankings, this parameter is too high for leaders. Under investigation, the authors considered the x3 weight for the health indicator in the Legatum Prosperity Index.

Electoral Incentives and the Allocation of Public Funds

Abstract Politicians allocate public resources in ways that maximize political gains, and potentially at the cost of lower welfare. In this paper, we quantify these welfare costs in the context of Brazil’s federal legislature, which grants its members a budget to fund public projects within their states. Using data from the state of Roraima, we estimate a model of politicians’ allocation decisions and find that 26.8% of the public funds allocated by legislators are distorted relative to a social planner’s allocation. We then use the model to simulate three potential policy reforms to the electoral system: the adoption of approval voting, imposing a one-term limit, and redistricting. We find that a one-term limit and redistricting are both effective at reducing distortions. The one-term limit policy, however, increases corruption, which makes it a welfare-reducing policy.

Income Tax Evasion: Tax Elasticity, Welfare, and Revenue

This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of the tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions with discussion of tax acts and government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.

Competition analysis of the UK intercity coach market: a structural econometric model

This paper investigates the effectiveness of liberalization policy on the intercity coach market in England and Wales and evaluates its impact in promoting competition and enhancing welfare. The paper adds to the current literature by assessing this policy focusing on natural monopolies, deriving a structural model of the industry and using web-scraped key market-level data in the study. Regression analysis and descriptive statistics suggest peripheral routes with a small market size are natural monopolies, where passengers pay higher prices. We estimate a structural model, currently absent from the literature, which shows that these routes are characterized by lower welfare levels. The model allows us to simulate a policy promoting competition on such routes showing that a regulator could generate net welfare gains by implementing a more competitive equilibrium on these routes. This paper confirms the dominant conclusion that unregulated coach industries detrimentally consolidate, as demonstrated in other European markets.

Calving difficulty influences rumination time and inflammatory profile in Holstein dairy cows

Difficult calving may adversely affect dairy cow health and performance. Maternal:fetal disproportion is a major cause of dystocia. Therefore, the main objective of this study was to assess the effects of dam:calf body weight ratio (D:C) on calving difficulty, rumination time, lying time, and inflammatory profile in 25 Holstein dairy cows. Using automatic monitoring systems, we monitored behavior and production in 9 primiparous and 16 pluriparous cows between dry-off and 30 d in milk. During the same period, we collected blood samples to monitor metabolism and inflammatory profile of these cows. Calvings were video recorded to assess calving difficulty and observe the duration of the expulsive stage. After parturition, the cows were separated into 3 classes according to their D:C: easy (E; D:C >17), medium (M; 14 < D:C <17), and difficult (D; D:C <14). The cows in class D showed relatively longer labor durations (108 min vs. 54 and 51 min for classes D, M, and E, respectively) and higher calving assistance rates (50% vs. 0 and 11% of calvings for classes D, M, and E, respectively) than those in the other 2 classes. Compared with the cows in classes M and E, those in class D exhibited shorter rumination times on the day of calving (176 min/d vs. 288 and 354 min/d for classes D, M, and E, respectively) and during the first week of lactation (312 min/d vs. 339 and 434 min/d for classes D, M, and E, respectively) and maintained lower rumination values until 30 DIM (399 min/d vs. 451 and 499 min/d for classes D, M, and E, respectively). Primiparous class D cows had shorter resting times during the first week after calving compared with those in class M (8 vs. 11 h/d for classes D and M, respectively). Interclass differences were found in terms of the levels of inflammation markers such as acute-phase proteins (ceruloplasmin, albumin, retinol, and paraoxonase). Moreover, cows in class D had lower plasma levels of fructosamine and creatinine after calving. Low D:C reduced postcalving rumination time and increased inflammation grade, suggesting a lower welfare of these animals at the onset of lactation. The D:C might serve as a useful index for the identification of cows at relatively higher risk of metabolic and inflammatory disease, thus helping farmers and veterinarians improve the welfare and health of these cows.

Income tax evasion: tax elasticity, welfare, and revenue

This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of the tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions along with discussion of government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.

Effects of TV airtime regulation on advertising quality and welfare

This paper investigates how regulations that limit advertising airtime may affect advertising quality and social welfare. I show, first, conditions under which an advertising cap may reduce or improve the average quality of advertising broadcast on a free-to-air TV platform. Second, an advertising cap may reduce TV platform’s and firms’ profits, while the net effect on viewers’ welfare is ambiguous because the ad quality may decrease as a result of a regulatory cap offsetting the direct gain from watching fewer ads. The results suggest that a regulator that is trying to increase social welfare via regulation of the volume of advertising on TV should take the effect of advertising quality into consideration. Implementing an advertising cap without regard to ad quality may result in lower social welfare than leaving advertising airtime unregulated.

Blending Bottom-Up and Top-Down Urban Village Redevelopment Modes: Comparing Multidimensional Welfare Changes of Resettled Households in Wuhan, China

Urban village redevelopment has multidimensional impacts on resettled households. These impacts can reflect the sustainability of urban village redevelopment. This study empirically compares the gains and losses of the welfare in economic conditions, living conditions, natural environment, psychological conditions, and social security in bottom-up and top-down urban village redevelopment cases in Wuhan, China. The results show that a bottom-up redevelopment mode with participative residents caused negative effects in economic welfare but positive effects on living conditions, natural environment, and psychological condition, thus promoting higher comprehensive welfare and satisfaction. Top-down redevelopment led by the government provides villagers with shared dividends through collective economic reform and thus, contributes to gains in economic conditions and social security. However, top-down redevelopment with less participation of residents leads to welfare losses in living conditions, natural environment, and psychological conditions, which results in lower welfare and satisfaction levels overall. Therefore, a middle-out redevelopment mode with a combination of government efforts and public participation are proposed as a solution for sustainable urban redevelopment.