Welfare Reducing Research Articles

Give and You Shall Receive: The Emergence of Welfare-Reducing Reciprocity

We develop a new experiment to study the emergence of welfare-reducing bilateral alliances within larger groups, and the effectiveness of institutional interventions to curtail this reciprocal alliance behaviour. In each of the 25 rounds of our experiments, a player (the 'allocator') nominates one of three others as a co-worker (the 'receiver'), which deter- mines the group production that period to be the productivity of the receiver (which varies by round), but also gives the receiver a bonus and makes them the allocator in the next round. Alliances then form if two individuals keep choosing each other even when their productivities are lower than that of others, causing efficiency losses. Males and business students are found to be more likely to form welfare reducing alliances. Random allocator rotation policies and low bonuses fail to significantly improve overall welfare: rotation policies significantly reduce the rate of formation of new alliances but do not lead to the breakdown of existing alliances, while low bonus policies are only found to be effective when alliances are well established. This points to the importance of the strength of existing alliances for the chances of institutional interventions curtailing welfare reducing reciprocity, i.e. 'back-scratching'.

How Do Natural Gas Prices Affect Electricity Consumers and the Environment?

Between 2008 and 2012, the delivered price of natural gas to the U.S. power sector fell 60 percent. This paper addresses, in theory and in practice, the effects of this negative price shock on electricity consumers and the environment. We demonstrate with a simple model that the larger the effects of gas prices on consumer welfare, the smaller the effects on pollution emissions and the smaller the increase in profits of existing natural gas-fired generators. Using detailed data on electricity prices, fuel consumption, and fuel prices from 2001 to 2012, we confirm this hypothesis. Regions that experience greater reductions in pollution emissions experience smaller reductions in electricity prices and consumer welfare.

Disclosure Policy in a Mixed Market

This paper investigates the optimal disclosure strategy for private information in a mixed duopoly market, where a state-owned enterprise (SOE) and a joint-stock company compete to supply products. I construct a model where the two firms compete in either quantity or price, and uncertainty is associated with either marginal cost or market demand. The model identifies the optimal disclosure strategies that constitute a perfect Bayesian equilibrium by type of competition and uncertainty. In Cournot competition, both firms disclose information under cost uncertainty, while only the SOE or neither firm discloses information under demand uncertainty. Alternatively, in Bertrand competition, only the joint-stock company discloses information under cost uncertainty or demand uncertainty. Recently, developed countries have required the same level of disclosure standards for SOEs as for ordinary joint-stock companies. The findings described in this paper warn that such mandatory disclosure by SOEs can trigger a reaction by joint-stock companies, putting the economy at risk of a reduction in welfare.

Detecting Collusion. The Cartel Index Applied to the Dutch Economy.

Illegal cartels and other collusive agreements are welfare reducing and exist everywhere in the economy. It is therefore important that we detect and prosecute such collusive behavior in order to increase the competitiveness of the economy. In this thesis a method is developed to detect the location of collusive behavior. This method, called the Cartel Index, can be used by competition authorities complementary to other instruments such as leniency programs.The Cartel Index screens all sectors of the economy using nine easily measurable indicators of collusion. These indicators are selected from a comprehensive list of available indicators of collusion identified by theoretical and empirical literature. From these nine indicators an index is constructed which gives an indication of the likelihood of collusion existing in a certain sector.With the use of publicly available data the index is then applied to the Dutch economy and compared to various other indices of competitiveness. It showed us that the index can help us to determine in which sectors collusion is most likely, but that a more thorough study of an identified sector is necessary to verify the existence of collusion.The detection method developed in this thesis could be used by the Netherlands Competition Authority as a tool to prioritize sector investigations.

Fly emergence from manure of Japanese quail fed thymol- or isoeugenol-supplemented diets

Many problems in poultry production are caused by a combination of interrelated factors such as management, stress, nutrition, and exposure to pathogens. Saprophagous flies that develop in poultry manure are a potential route of pathogen transmission. Besides being a nuisance, defecation and regurgitation of flies soil equipment and structures and can reduce light levels of lighting fixtures. These effects clearly affect management and may contribute to reductions in poultry egg production, health, and welfare. Many essential oils or their main components have bioactive effects such as natural repellents and insecticides, antioxidants, anticholesterolemics, and antimicrobials. This study evaluated if supplementing quail feed with thymol or isoeugenol as functional food could alter the production of flies from manure. Dropping samples deposited by quail fed with a supplementation of 2,000 mg of thymol or isoeugenol per kg of feed or no supplement (control) were collected. Each sample was incubated inside an emergence cage that was inspected daily to collect emerging adult flies. Fewer flies emerged from droppings of quail fed a thymol-supplemented diet (P = 0.01) and there was a tendency to a lower emergence from droppings of isoeugenol-fed quail (P = 0.09). The number of positive containers for Musca domestica was smaller from quail droppings of thymol- (P = 0.02) or isoeugenol- (P = 0.01) supplemented feed than from the control counterparts, suggesting an oviposition repellent effect. Supplementing quail feed with thymol or isoeugenol has an overall moderate effect against flies, reducing M. domestica emergence.

104. Overcrowding stress decreases macrophage activity and increases Salmonella Enteritidis invasion in broiler chickens

Overcrowding stress is a reality in the poultry industry. Chickens exposed to long-term stressful situations present a reduction of welfare and immunosuppression. We designed this experiment to analyze the effects of overcrowding stress (16 birds/m 2 ) on performance parameters, serum corticosterone levels, the relative weight of the bursa of Fabricius, plasma IgA and IgG levels, intestinal integrity, macrophage activity and experimental Salmonella Enteritidis invasion. The overcrowding stress decreased performance parameters, induced enteritis and decreased macrophage activity and the relative bursa weight in broiler chickens. When the chickens were similarly stressed and infected with Salmonella Enteritidis , there was an increase in feed conversion and a decrease in plasma IgG levels in the stressed and Salmonella-infected birds. Moderate enteritis was observed throughout the duodenum of chickens stressed and infected with Salmonella. Moreover, the overcrowding stress decreased the macrophage phagocytosis intensity and increased Salmonella Enteritidis counts in the livers of birds challenged with the pathogenic bacterium. Thus, we believe that overcrowding stress via the hypothalamic–pituitary–adrenal axis that is associated with an increase in corticosterone and enteritis might influence the quality of the intestinal immune barrier and the integrity of the small intestine. This effect allowed pathogenic bacteria to migrate through the intestinal mucosa, resulted in inflammatory infiltration and Salmonella invasion.

POLICY GAMES, DISTRIBUTIONAL CONFLICTS, AND THE OPTIMAL INFLATION

This paper shows that limited asset-market participation (LAMP) generates an extra inflation bias when the fiscal and the monetary authority play strategically. A fully redistributive fiscal policy eliminates the extra inflation bias, but at the cost of reducing Ricardians' welfare. A fiscal authority that redistributes income only partially reduces the inflation bias, but raises government spending. Although a fully conservative monetary policy is necessary to get price stability, it implies a reduction in liquidity-constrained consumers' welfare, in the absence of redistributive fiscal policies. Finally, under a crisis scenario, none of the policy regimes is able to avoid the fall in economic activity when the increase in the fraction of LAMP is coupled with a negative technology shock, whereas optimal policy can avoid recession when it responds to the increase in LAMP proportion alone.

The Impact of iPhone Exclusivity Arrangement on Demand for Smartphones

In this paper, we examine how an exclusivity agreement between Apple and wireless carriers in six developed countries affected the purchase of iPhones. Under this arrangement, one wireless carrier in each country became the exclusive distributor of the iPhone for a given period of time. The restriction would lead to a bounded choice set of consumers attached to non-exclusive carriers and thus would affect their choice of smartphone. To measure how this limited access to the iPhone would affect smartphone sales and consumer welfare, a structural model of consumer demand is developed and applied to a unique data set comprised of a panel data of mobile handset sales for a five-year period from 2008 through 2012 in the six countries considered. The model accounts for the possible endogeneity of the exclusivity duration, for heterogeneous consumer taste, and for variations in iPhone availability across consumers. The parameters estimated by this model suggest that the exclusivity arrangement ultimately resulted in a significant reduction in iPhone sales and an overall loss in the sale of all smartphones. Specifically, while it was estimated that the exclusivity arrangement would lead to a decrease in iPhone sales of approximately 26.2 million and an increase in the sale of other smartphones of only 15.1 million in the six countries. Our results also suggest that although the restricted availability of the iPhone may have led to a substantial reduction in consumer welfare, a revenue-sharing agreement between Apple and the wireless carriers may have mitigated the company's loss of profit.

Motivating a Supplier to Test Product Quality

This paper considers a supplier that offers a buyer a new product of unknown quality. The supplier can run a test that partially reveals unverifiable information concerning the quality, and the buyer can learn the actual quality after agreeing to buy the new product. I identify two main features of a contract for motivating the supplier to run the test. First, the contract may specify an upward or downward quantity distortion. Second, the contract may include slotting allowances, which may be welfare reducing when they discriminate against financially constrained suppliers.

Dangling at the Abyss: How Deadweight Costs and Political Attitudes May Prevent (or Induce) Collapse

Analysts have considered what might check the 20th century growth in government, thereby avoiding Leviathan and economic collapse. We develop a model where political economy equilibrium pushes the economy to the brink of collapse, but rising marginal welfare costs may prevent collapse. For small reductions in welfare from government, rational ignorance enables special interests to gain. When deadweight costs become large, taxpayers provide political opposition that prevents collapse. Optimistic views of government may alter this conclusion and induce collapse. However, if favorable attitudes toward government are revised downward in light of poor economic performance, this concern is lessened.

Analisis Depresiasi dan Kebijakan Pengelolaan Sumberdaya Ikan Layang di Wilayah Perairan Kota Ambon

Generally, fishery resources are open access which means that anyone can participate without having these resources. This is shown by an increase in the utilization of fish resources that will lead to a crisis in which when the rate of exploitation goes beyond the ability of regeneration that makes the catches more economical (economic overfishing). Moreover, this will take place in conditions of uncontrolled fishing. The main factor causing this crisis is the uncontrolled human intervention toward the existing fishery resources. The exploitation of these resources can lead to an imbalance between the input and the potential capture of fish resources so that it can lead to over-fishing, overcapacity, inefficiency arrest, resource rents decline, degradation of the resource stock and a decrease in production. The degradation impact of small pelagic fish resource, especially Layang fish in Ambon also is the reduction of producer welfare, especially the welfare of fishermen and coastal communities. This is due to, among others, the lack of control from the government as the authors,, and the lack of understanding of resource actors (local fishermen) about the nature of fish resources which are open access. Thus, the calculation of the depreciation of small pelagic fish resources, especially lyang fish, and welfare aspects which are considered important to know as a point of reference as well as an early warning signal to determine whether the extraction of small pelagic fish resources, especially layang fish in Ambon has exceeded their capabilities.

English

The main objective of this study was to investigate the determinants of household food expenditure and its effects on welfare. As a result of potential simultaneity between food expenditure and welfare, a simultaneous equations model was estimated using the two-stage least squares method. The findings confirm the theoretical and empirical evidences that households reduce the percentage share of their food expenditure as they become richer. Also, increases in the food budget share lead to a reduction in welfare. Different households which spent greater percentages of their incomes on food were as follows: female headed households; households headed by the aged; households whose heads had little or no formal education; households whose heads were married; smaller households; rural households; households in the forest and savannah belts; and households living farther from the nation’s capital. Also, welfare was greater for the following households: female headed households; households headed by the aged, households whose heads had formal education, smaller households, households who owned assets; households living in the urban centres, as well as those living closer to the nation’s capital. Households that must be targeted for support include male-headed households, households headed by the relatively young, larger households, rural households and households farther from the nation’s capital, including those in the savannah belt.

Urban compactness and the trade-off between air pollution emission and exposure: Lessons from a spatially explicit theoretical model

Air pollution is a major concern in urban areas worldwide. The interplay between urban structure and air pollution from an environmental, health and social perspective is the focus of our work: we model how urban structure impacts traffic-induced pollutant emissions and the exposure of residents to those pollutants.We present a chain of models applied to theoretical monocentric space: a residential choice model with endogenous open-space and road network, a commuting traffic generation and road assignment model and a pollutant emissions, dispersion and exposure model. The theoretical study approach decouples results from location specific characteristics and enables us to analyse how the preference of households for green amenities, a transport tax, the provision of public transport alternatives and local neighbourhood design impact the environment (total emissions) as well as residents’ health (population exposure) and utility.We emphasise that environmental strategies in the form of urban compaction have a strong impact on the exposure of households to pollutants, especially close to the centre, in addition to their reduction of welfare. Our results suggest that more beneficial policy outcomes can be obtained from strategies which preserve green spaces close to the centre or which intend a greater shift from car to public transport. Further, we find indication that different local designs of neighbourhoods have much stronger impacts on the exposure–emission tension than city-wide land use or transport options.

Policy Responses to Aid Surges in Countries with Limited International Capital Mobility: The Role of the Exchange Rate Regime

Summary We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption—an increase in the current account deficit net of aid—delivering the same effects as those of a flexible regime but with a necessary increase in inflation. Regardless of the regime, policies that limit absorption and result in large accumulation of reserves—are welfare reducing: they help reduce the real appreciation (and inflation under the peg), but at the expense of reducing private consumption and investment, and therefore medium-term growth.

Vote trading with and without party leaders

Two groups of voters of known sizes disagree over a single binary decision to be taken by simple majority. Individuals have different, privately observed intensities of preferences and before voting can buy or sell votes among themselves for money. We study, theoretically and experimentally, the implication of such trading for outcomes and welfare when trades are coordinated by the two group leaders and when they take place anonymously in a competitive market. The theory has strong predictions. In both cases, trading falls short of full efficiency, but for opposite reasons: with group leaders, the minority wins too rarely; with market trades, the minority wins too often. As a result, with group leaders, vote trading improves over no-trade; with market trades, vote trading can be welfare reducing. The theoretical predictions are strongly supported by the experimental data.

THE IMPORT RESTRICTION OF HORTICULTURAL PRODUCT, DOMESTIC ACTIVITIES, PRICE LEVEL, AND THE WELFARE

This paper analyzes the impact of entry ports reduction on horticultural production on the economic activities, prices and also toward social welfare by using Computable General Equilibrium (CGE) model. The simulation shows higher import restriction on horticultural products will not only increase the factor income (at current value), but will also increase the composite prices. The higher effect of the latter leads to social welfare reduction, but on the other hand favors the agriculture household types. This finding shows import restriction on horticulture product serves as income redistribution policy instrument. With regard to this, the monetary authority should take the issue into account, especially in order to anticipate the effect of composite prices increase, which could lead to the need of extra efforts in managing price stability. Keywords: import reduction; prices, inflation, CGE; social welfare; income distribution.JEL Classification: E25, E27

DAMPAK PEMBATASAN IMPOR HORTIKULTURA TERHADAP AKTIVITAS PEREKONOMIAN, TINGKAT HARGA DAN KESEJAHTERAAN

This paper analyzes the impact of entry ports reduction on horticultural production on the economic activities, prices and also toward social welfare by using Computable General Equilibrium (CGE) model. The simulation shows higher import restriction on horticultural products will not only increase the factor income (at current value), but will also increase the composite prices. The higher effect of the latter leads to social welfare reduction, but on the other hand favors the agriculture household types. This finding shows import restriction on horticulture product serves as income redistribution policy instrument. With regard to this, the monetary authority should take the issue into account, especially in order to anticipate the effect of composite prices increase, which could lead to the need of extra efforts in managing price stability. Keywords: import reduction; prices, inflation, CGE; social welfare; income distribution.JEL Classification: E25, E27

Pooling with Essential and Nonessential Patents

Several recent technological standards were accompanied by patent pools—arrangements to license relevant intellectual property as a package. A key distinction made by regulators—between patents essential to a standard and patents with substitutes—has not been addressed in the theoretical literature. I show that pools of essential patents are always welfare increasing, while pools which include nonessential patents can be welfare reducing—even pools limited to complementary patents and stable under compulsory individual licensing. If pools gain commitment power and price as Stackelberg leaders, this reduces, and can reverse, the gains from welfare-increasing pools. (JEL D43, D45, K21, L13, L24, O34)

Overcrowding stress decreases macrophage activity and increases Salmonella Enteritidis invasion in broiler chickens

Overcrowding stress is a reality in the poultry industry. Chickens exposed to long-term stressful situations present a reduction of welfare and immunosuppression. We designed this experiment to analyse the effects from overcrowding stress of 16 birds/m2 on performance parameters, serum corticosterone levels, the relative weight of the bursa of Fabricius, plasma IgA and IgG levels, intestinal integrity, macrophage activity and experimental Salmonella Enteritidis invasion. The results of this study indicate that overcrowding stress decreased performance parameters, induced enteritis and decreased macrophage activity and the relative bursa weight in broiler chickens. When the chickens were similarly stressed and infected with Salmonella Enteritidis, there was an increase in feed conversion and a decrease in plasma IgG levels in the stressed and Salmonella-infected birds. We observed moderate enteritis throughout the duodenum of chickens stressed and infected with Salmonella. The overcrowding stress decreased the macrophage phagocytosis intensity and increased Salmonella Enteritidis counts in the livers of birds challenged with the pathogenic bacterium. Overcrowding stress via the hypothalamic–pituitary–adrenal axis that is associated with an increase in corticosterone and enteritis might influence the quality of the intestinal immune barrier and the integrity of the small intestine. This effect allowed pathogenic bacteria to migrate through the intestinal mucosa, resulting in inflammatory infiltration and decreased nutrient absorption. The data strengthen the hypothesis that control of the welfare of chickens and avoidance of stress from overcrowding in poultry production are relevant factors for the maintenance of intestinal integrity, performance and decreased susceptibility to Salmonella infection.

Policy Responses to Aid Surges in Countries with Limited International Capital Mobility: The Role of the Exchange Rate Regime

We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption — an increase in the current account deficit net of aid—delivering the same effects as those of a flexible regime but with a necessary increase in inflation. Regardless of the regime, policies that limit absorption—and result in large accumulation of reserves—are welfare reducing: they help reduce the real appreciation (and inflation under the peg), but at the expense of reducing private consumption and investment, and therefore medium-term growth.