Welfare Comparisons Research Articles

Subsidy scheme or price discount scheme? Mass adoption of electric vehicles under different market structures

This paper analyzes the electric-and-gasoline vehicle market under two different structures: monopoly and duopoly. Taking social welfare into account, the government offers a subsidy incentive scheme or a price discount incentive scheme to buyers of electric vehicles (EVs) to promote the adoption of EVs. We formulate a utility model composed of a population of consumers who make utility maximizing choices and manufacturers who set an optimal pricing that responds to the interventions of the government. Using this model, a framework for policy makers to find optimal subsidies or optimal price discount rates is developed. Unlike the monotonic relation in the monopoly setting, in the duopoly setting the relationship between consumers’ low-carbon awareness and EVs’ demand depends on the government’s policy. Although the demand for EVs, the consumer surplus, the environmental impact, and the social welfare are identical under two incentive schemes, the government prefers to implement a subsidy incentive scheme due to the lower expenditure involved. Furthermore, under a subsidy incentive scheme, EVs’ market in the monopoly setting has a smaller environmental impact than that in the duopoly setting. From the numerical tests, we show that results of social welfare comparison under two market structures depends on unit environmental impact of EV.

International welfare comparison using GDP and better life index parameters

Purpose- In this study, an international welfare comparison is made for OECD members together with selected thirty eight countries using purchasing power parity (PPP) based on GDP per capita and better life index (BLI) parameters which is prepared by OECD as an alternative to welfare measurement. The purpose of this study is to research relations between national income and human welfare that is generated according to BLI criteria’s. Methodology- For this study, 2016 year data is used. The reasons are: Latvia and South Africa countries are added in 2016 and 2016 year is the latest edition for BLI which is renewed itself year by year. In addition when BLI is compared with GDP, reasons of being preferred PPP numbers are: One of the variables of BLI which is income criteria and its indicators incomes and fortunes of households are calculated by PPP based; PPP gives opportunity to comparison of real good and services eliminating the differences of price level among countries; in calculation of PPP, economic factors such as currency fluctuations, interest rates and capital flows are not taken into account; rather than just National income, PPP based GDP per capita is more personal like BLI. Findings- The result obtained from this study is that; when it examined carefully, countries with high national income per capita cannot score high in terms of BLI values. At first glance, it can be asserted that there is a strong positive relation between GDP per capita and BLI parameters by saying that countries like Norway, Switzerland and Sweden are at the top both in national income per capita and BLI based rankings; or countries like South Africa, Mexico, Brazil, Turkey are at the bottom both in national income per capita and BLI based rankings. However, if there was a strong positive relation between GDP per capita and BLI; Luxembourg, which is by far the best in national income per capita ranking, wouldn’t be placed rank number twelve in average BLI values ranking. Similarly, New Zealand, which is placed rank number twenty in national income per capita ranking among thirty eight countries, wouldn’t be placed rank number seven in average BLI values ranking. These tangible examples are not limited to a few countries. For example, Ireland, which ranks fourth in GDP per capita rankings, ranks sixteenth in average BLI values rankings; Denmark, which ranks twelfth in the national income per capita, ranks third in terms of average BLI values rankings. Conclusion- A country’s high level of national income does not necessarily mean that it is at a level of contemporary civilization. If it is asked to evaluate a country in terms of welfare perspective; not just only monetary value of produced goods and services in that country shouldn’t be taken into account but also factors such as education, justice, employment, security, environment and social connections should be taken into account from a wider perspective.

Impact of the separate pre-slaughter stages on broiler chicken welfare

Before broilers are slaughtered, several parties are involved in catching, loading, transportation and lairage. During these pre-slaughter activities, broilers are exposed to a variety of stressors. A detailed understanding of how broiler welfare is impaired during each stage could help the responsible parties to make targeted improvements. The aim of this study was to identify welfare problems occurring during the consecutive stages of commercial broiler transportation and to identify risk factors associated with the identified welfare problems. Commercial Belgian transports (n = 81) were assessed in spring (n = 14), summer (n = 33), autumn (n = 10), and winter (n = 24), and potential risk factors were recorded by the observer. Animal-based welfare indicators were scored before the start of the pre-slaughter phase as well as after the catching, transport and lairage, and slaughter stages to assess the impact of each stage. The most frequently observed welfare impairments were vent and thigh lesions, panting, wing fractures, and bruising on wings and breasts. Our results show that the impact of the pre-slaughter phase on broiler welfare is multifaceted. The overall pre-slaughter phase resulted in a mean weight decrease of 5.3%, a prevalence of 1.4% in leg bruising, and 3.7% in breast or wing bruising. Wing fractures occurred mainly during the catching stage: Prevalence increased from 0.1% to 1.9% (P = 0.003). A welfare comparison before and after transportation and lairage revealed that plumage had become more soiled (P = 0.003), body temperature decreased by 0.7°C (P < 0.001), huddling prevalence increased by 0.5% (P = 0.008), prevalence of birds with splayed legs increased by 0.08% (P = 0.008), prevalence of supine birds decreased by 0.05% (P = 0.003), and 0.1% fewer birds with wings stuck in the crates (P = 0.010) were observed. Risk factor analyses revealed that carefully choosing the catching crew, minimizing thermal stress, reducing duration of transportation, and worker training are promising actions that may improve broiler welfare during the pre-slaughter phase.

The Role of Prices in Welfare Comparisons: Methodological Developments and a Selective Survey of the Empirical Literature

Prices play a central role in a wide range of applications in economics, ranging from macro topics such as inflation targeting, purchasing power parity between currencies, global poverty and real Gross Domestic Product (GDP) comparisons to micro topics such as inequality and poverty at household level and the distributive effects of price movements. The literature on price measurement has also impacted on, and been impacted by, developments in the demographic demand literature based on the treatment of household composition as analogous to prices. While there is now a sizeable statistical literature on price measurement, there is hardly any survey of the empirical economics literature where prices play a central role in the analysis. This paper attempts to address this gap and provides a survey of the methodological developments in price measurement followed by a selected review of their empirical applications.

Informational Content of Equivalence Scales Based on Minimum Needs Income

Uniform equivalence scales are routinely used for welfare comparisons and require that utility function is IB/ESE (independent of base/equivalent scale exact). This condition itself requires restrictions on the level of measurability and interpersonal comparability of preferences across households, so called informational basis, in that welfare ordering must be Ordinal and Fully Comparable (OFC). We show that if one calculates equivalence scale at particular utility level, for example households living in poverty, the informational basis is much weaker and requires full comparability only at a single point. For this purpose we introduce the axiom of Ordinal Local Comparability (OLC) and show that equivalence scale based on Minimum Needs Income is consistent with that axiom. We argue that subjective equivalence scale using the intersection method offers practical application of equivalence scale consistent with OLC.

'Fair' Welfare Comparisons with Heterogeneous Tastes: Subjective Versus Revealed Preferences

'Fair' Welfare Comparisons with Heterogeneous Tastes: Subjective Versus Revealed Preferences

様々な飼育方式における肥育豚の福祉レベルならびに生理的ストレスの実態

スノコ床のウィンドウレスで20頭群飼（SI），スノコ床のウィンドウレスで350頭群飼（LI），発酵床のビニールハウスで400頭群飼（LD），放牧地で9頭群飼（SP）の4つの飼育方式における肥育豚の動物福祉レベル並びに生理的ストレス指標の実態を調査した．福祉評価にはWQ®プロトコルを用い，生理的ストレス評価は血清中コルチゾール濃度と健康性に関わるストレス指標である免疫グロブリンA（IgA）濃度を，唾液，糞便，血液から測定した．福祉評価点はSP > LD > LI > SIの順で，福祉レベルは前2者で「良」，後2者で「可」と評価された．血清中コルチゾール濃度はLIで突出して高く，唾液中IgAはSIとLIで高く，糞便中IgAはSIとSPで高かった．SIは低福祉でストレスレベルが高く，LIは低福祉でストレスレベルが最も高く，糞便中IgAは極端に低く，LDは高福祉で低ストレス，SPは最も福祉レベルが高く，ストレスレベルもやや高いが正常値範囲内の飼育方式と考えられた．

Multidimensional Welfare Comparisons of EU Member States Before, During, and after the Financial Crisis: A Dominance Approach

How did the financial crisis affect population welfare in EU member states in key dimensions such as income, health, and education? Using EU-SILC data, we seek to answer this question by way of first order dominance comparisons between countries and over time. The novel feature of our study is that we perform welfare comparisons on the basis of multi-level multidimensional ordinal data. We find that the countries most often dominated are southern and eastern European member states, and the dominant countries are mostly northern and western European member states. However, for most country comparisons, there is no dominance relationship. Moreover, only a few member states have experienced a temporal dominance improvement in welfare, and no member states have experienced a dominance deterioration.

Welfare Comparisons with a Consumer-Friendly Upstream Firm: Centralized vs. Decentralized Bargaining

We investigate the endogenous choice of price (Bertrand) and quantity (Cournot) contract and the resulting social welfare in a vertically related up-stream-downstream market with a consumer-friendly upstream firm. We find that choosing price (quantity) contract is the dominant strategy for downstream firms when the two-part-tariff pricing contract is determined through centralized (decentralized) Nash bargaining. Moreover, if the consumer-friendly up-stream firm’s valuation over consumer surplus is sufficiently high and the product differentiation degree is sufficiently low, centralized bargaining is welfare-superior to decentralized bargaining. On the other hand, if the consumer-friendly upstream firm’s valuation over consumer surplus is sufficiently low and the product differentiation degree is sufficiently high, decentralized bargaining is welfare-superior to centralized bargaining. We also show that decentralized bargaining generates higher consumer surplus as compared to centralized bargaining, irrespective of both the product differentiation degree and the upstream firm’s valuation over consumer surplus.

The Welfare Comparison of Ad-Valorem Tax and Specific Tax with Both Quality and Quantity Choice of a Consumer

This paper compares ad-valorem and specific taxation in models where a representative consumer with an exogenous income has both a quality and a quantity choice under perfect competition. In the setting, while ad-valorem tax causes income effect only, specific tax causes both income effect and substitution effect. Therefore, ad-valorem tax decreases consumer demand for both quality and quantity; on the other hand, specific tax decreases consumer demand for quantity. However, the sign of consumer demand for quality is ambiguous and is determined by the curvature of marginal utility on quantity. Additionally, using a constant elasticity of substitution (CES) utility function and a linear price function, we show that ad-valorem tax is superior to specific tax except for the Leontief preference under which the two forms of commodity taxes generate the same tax revenue. The substitution effect caused by specific tax disappears if the elasticity of substitution converges to zero.

How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare

ABSTRACT In August 1997, the U.S. Food and Drug Administration (FDA) allowed brand-specific advertising on television. A simultaneous rise in direct-to-consumer advertising (DTCA) spending and prescription drug sales has resulted in a heated debate among pharmaceutical firms and medical practitioners, as well as in the U.S. Congress and the popular press. One side claims that DTCA creates demand and higher prices for the advertised brands; the other claims that DTCA increases consumer knowledge. The current study sheds light on the debate with a comparison of consumer welfare before and after the 1997 policy change, using a structural econometric model. The results suggest that DTCA seems to be increasing consumer welfare.

Misplaced Paternalism and other Mistakes in the Debate over Kidney Sales.

Erik Malmqvist defends the prohibition on kidney sales as a justifiable measure to protect individuals from harms they have not autonomously chosen. This appeal to 'group soft paternalism' requires that three conditions be met. It must be shown that some vendors will be harmed, that some will be subject to undue pressure to vend, and that we cannot feasibly distinguish between the autonomous and the non-autonomous. I argue that Malmqvist fails to demonstrate that any of these conditions are likely to obtain. His argument involves two common errors. First, he, like many, proceeds on a mistaken understanding of how to assess harm. What matters is not the balance of costs and benefits of vending, but a comparison of potential vendors' welfare across two possible courses of action. Second, Malmqvist's concerns about third-party pressure are predicated on an empirically unrealistic understanding of the operation of a regulated market. A widely underappreciated fact is that kidney sales will be relatively rare, and most who try to vend will be unable to. Because pressure on another to vend will not result in the desired outcome, few will exert it.

Welfare Implications of Congestion Pricing: Evidence from SFpark

Congestion pricing provides an appealing solution to urban parking problems. By charging varying rates across areas based on their congestion levels, congestion pricing shifts demand and allows a better allocation of limited resources. It aims to increase the accessibility of highly desired public goods for commuters who value them, and reduce traffic caused by drivers searching for available parking spaces. Using data from the City of San Francisco both before and after a congestion pricing scheme was implemented in 2011, we estimate the welfare implications of the policy. We use a two-stage dynamic search model to estimate consumers' search costs, distance disutilities, price sensitivities and trip valuations. These estimates then allow us to conduct welfare comparisons. We find that congestion pricing increases consumer welfare in popular areas, but when implemented in less-congested areas, it may actually hurt consumer welfare. In one of the districts under study, consumers ended up searching more, parked further away and paid more. Interestingly, despite the improved availability, congestion pricing may actually increase traffic due to cruising (searching for parking), as price sensitive consumers start to search for inexpensive parking spaces, particularly when prices are highly dispersed geographically. Through counterfactual analyses, we find that a simple three-tier pricing policy, which eliminates the search for a lower price, can significantly increase welfare and achieve more than 50% of the welfare increase achieved by a full price information benchmark.

CAN TOTAL DEREGULATION BE A BETTER OPTION THAN PARTIAL DEREGULATION?

This paper examines entry deregulation in an industry where natural monopoly and potential competition are vertically related. We find that the upstream fixed cost plays an important role to affect the overall welfare comparison between total and partial deregulation. When the upstream fixed cost is sufficiently large, the number of downstream firms is limited in both situations; in other words, the duplication of downstream fixed costs is relatively irrelevant so that the double markup effect dominates. Consequently, the regulator can only replicate total deregulation to maximize social welfare in the event of partial deregulation. If it is the case, we suggest that total deregulation is superior to partial deregulation since the latter suffers more regulatory cost than that of the former.

Optimal Public Debt Redux

We examine the role played by government investment in infrastructure in determining the optimal quantity of public debt in a heterogeneous agent economy with incomplete insurance markets. Calibrating our model to the key aggregate and distributional moments of the U.S. economy, we show that, (i) the inclusion of infrastructure, and (ii) transitional dynamics between stationary states critically affects the characterization of the optimal level of public debt. Welfare comparisons between stationary equilibria indicate that it is optimal for the government to accumulate assets (public surplus). However, once transitional dynamics are accounted for, the optimal share of public debt turns out to be positive and close to the current level of public debt in the U.S. These contrasting results underscore a previously ignored channel through which public investment and tax policies can generate differential trade-offs for the precautionary savings motive for households in the short run and long run. Our results also indicate that the inclusion of public infrastructure in the model specification implies a lower level of optimal debt relative to the model without infrastructure, both when comparing steady states as well as accounting for transitional dynamics.

Husbandry and enclosure influences on penguin behavior and conservation breeding

Multi-zoo comparisons of animal welfare are rare, and yet vital for ensuring continued improvement of zoo enclosures and husbandry. Methods are not standardized for the development of zoo enclosures based on multiple indicators, and case study species are required. This study compares behavior and breeding success to various enclosure and husbandry parameters for the Humboldt penguin, Spheniscus humboldti, for the development of improved enclosure design. Behavioral sampling was completed at Flamingo Land over a period of 8 months. Further data on behavior, enclosure design, and breeding success were collected via questionnaires, visits to zoos, and literature review. Breeding success was primarily influenced by colony age and number of breeding pairs, suggesting an important social influence on reproduction. Across zoos, there was also significant variation in behavior. The proportion of time spent in water varied between zoos (2-23%) and was used as an indicator of physical activity and natural behavior. Regression models revealed that water-use was best predicted by total enclosure area per penguin, followed by land area, with some evidence for positive influence of pool surface area per penguin. Predominantly linear/curvilinear increases in our biological indicators with enclosure parameters suggest that optimal conditions for S. humboldti were not met among the selected zoos. We propose revised minimum conditions for S. humboldti enclosure design, which exceed those in the existing husbandry guidelines. We present a framework for the evaluation of zoo enclosures and suggest that a rigorous scientific protocol be established for the design of new enclosures, based on multivariate methods. Zoo Biol. 35:385-397, 2016. © Wiley Periodicals, Inc.

Nonlinear monetary policy and macroeconomic stabilization in emerging market economies: Evidence from China

This paper provides a new approach to investigate monetary policy nonlinearities within a micro-founded DSGE model by incorporating a transition function into the traditional Taylor rule. The model is estimated using the Bayesian method for the Chinese economy over the period 1998–2013. The empirical results show that the central bank of China actually adopts a nonlinear Taylor rule and pursues an inflation target zone of [1%, 5%] rather than sticking to a rigid target. Further results from impulse responses and welfare comparisons suggest that economic stabilization is an important motive in the conduct of monetary policy in China and the adoption of a nonlinear rule seems to serve this goal better than the traditional linear rule.

Welfare comparison of electoral systems under power sharing

We generalize Borgers’ (Am Econ Rev 94:57–66, 2004) results to a broad class of power sharing electoral systems. We show that voluntary voting under a power sharing regime Pareto dominates both random decision making and compulsory voting. We also show, however, that voluntary voting is not socially optimal, as individuals vote too frequently.

A Functional Perspective to Financial Networks

The financial sector is a critical component of any economic system, as it delivers key qualitative asset transformation services in terms of liquidity, maturity and volume. Although these functions could in principle be carried out separately by specialized actors, in the end it is their systemic co-evolution the determines how the aggregate economy performs and withstands disruptions. In this paper we argue that a functional perspective to financial intermediation can be usefully employed to investigate the functioning of financial networks. We do this in two steps. First, we use previously unreleased data to show that focusing on the economic functions performed over time by the different institutions exchanging funds in an interbank market can be informative, even if the underlying topological structure of their relations remains constant. Sec- ond, a set of alternative artificial histories are generated and stress-tested by using real data as a calibration base, with the aim of performing counterfactual welfare comparisons among different topological structures.

A unified framework for the estimation of intra and inter country food purchasing power parities

PurposeThe purpose of this paper is to extend the methodology proposed in Majumderet al.(2012) for the estimation of the item-specific purchasing power parities (PPPs) within countries, to the cross-country context. It estimates item-specific intra-country PPPs (i.e. spatial prices) and inter-country PPPs in a unified framework using unit records of household food expenditures from three Asian countries: India, Indonesia and Vietnam, covering contemporaneous time periods. The study addresses a key limitation of the International Comparison Program (ICP) exercise, namely, that it treats all countries, large and small, as homogeneous entities. Moreover, it directly calculates bilateral PPPs between countries based on their expenditure patterns and prices alone and directly estimates the price-level indices (PLI) and their standard errors, allowing formal tests of the hypothesis of PLI being unity. The usefulness of the estimated PPPs is illustrated by applying them to comparisons of real food expenditures between the three countries, and benchmarking the comparisons with those using the ICP PPPs.Design/methodology/approachThe methodology is based on the fact that a spatial price index can be viewed as a true cost of living index (TCLI). Using a general cost function underlying the Rank 3 quadratic logarithmic systems, the TCLI is calculated for a reference utility level.FindingsThe study provides formal statistical tests of the hypothesis of item invariance of the PPPs. The usefulness of the proposed methodology is illustrated by applying the estimated PPPs in comparisons of food expenditures between subgroups in the three countries. The sensitivity of the expenditure comparisons to the use of item-wise PPPs underlines the need to provide price information on highly disaggregated PPPs to a much greater extent than the ICP has done to date.Research limitations/implicationsThe choice of these three Asian countries was dictated by the fact that, though comparability of items between them remains an issue as with all cross-country comparisons. Also, in the absence of price data, this study followed the practice in Majumder et al. (2012, 2015a, 2015b) in using as proxies the raw unit values of the food items, but adjusted for quality and demographic factors using the procedure introduced by Cox and Wohlgenant (1986) and extended by Hoang (2009).Practical implicationsIt addresses some limitations of the ICP, namely, ICP treats all countries as single entities with the purchasing power of the country’s currency assumed to be the same in all regions within the country, ICP uses the US dollar as the numeraire (this ignores the fact that the PPPs required in bilateral welfare comparisons between developing countries with vastly different consumption habits from the “international norm” are quite different from the ICP PPPs) and ICP uses distribution invariant prices to calculate PPPs, which overlooks the fact that the poor pay different prices from the “representative” individual.Social implicationsThis study highlights the importance of estimating and using item-specific PPPs in cross-country comparisons by formally testing and rejecting the assumption of item invariant PPPs and by providing empirical evidence that they do make a difference to the welfare comparisons between countries. This study provides PPPs based on food items only, which may be more relevant for poverty comparisons.Originality/valueIt introduces, for the first time, the concept of item-specific PPPs between countries as estimable parameters and operationalizes this concept by using them in cross-country welfare comparisons.