Welfare Comparisons Research Articles

Welfare comparisons within countries beyond GDP: An application to Nigeria

This study implements a novel method to assess subnational welfare differences, addressing the limitations of traditional measures based solely on output or consumption, and ordinal measures such as HDI. We develop a unified and theoretically grounded welfare measure that incorporates consumption, leisure, inequality in consumption and leisure, and life expectancy. The resulting welfare measure is cardinal and interpretable as a consumption equivalent, offering an advantage over ordinal indices such as HDI. Applying this method to Nigeria, the analysis reveals that welfare is positively correlated with consumption and HDI because all incorporate aspects of consumption, inequality, and health. However, welfare differences are four times greater than those suggested by consumption alone, with significantly different rankings, underscoring the critical roles of health and inequality in welfare. Additionally, the innovative inclusion of leisure, measured as non-labor time, significantly changes welfare rankings compared to HDI or IHDI.

Analisis Perbandingan Pendapatan dan Kesejahteraan Keluarga Karyawan Panen dengan Karyawan Panen dengan Karyawan Perawatan di PT. Socfin Indonesia (SOCFINDO) Kebun Aek-Loba, Kabupaten Asahan Provinsi Sumatera Utara

This study aims to find out 1. The wage system of harvest and maintenance employees at PT Socfindo, 2. Comparison of family income of harvesting and maintenance employees 3. Comparison of family welfare of harvest and maintenance employees at PT. Socfin Indonesia Aek-Loba Plantation. This study used a quantitative method by descriptive. The research location was chosen purposively at PT. Socfin Indonesia Aek-Loba Gardens. Sampling method uses purposive sampling technique and data collection method uses descriptive quantitative or descriptive statistics to determine income comparisons and welfare comparisons between families of harvest employees and families of maintenance employees at PT. Socfin Indonesia Aek-Loba Gardens. The research results obtained are 1. The wage system of harvest and maintenance at PT. Socfin Indonesia Aek-Loba plantations pay system which is given to harvest employees using a time unit system and yield units then maintenance employees use a time unit system. 2. Comparison of family income of harvesting and maintenance employees at PT. Socfin Indonesia Aek-Loba Plantation is a significant difference of IDR 1,227,549. 3. There is no significant difference between the welfare of the families of harvest employees and the maintenance at PT.Socfin Indonesia, Aek Loba Garden, Asahan Regency, North Sumatra.

Comparison of Farmer Welfare in Kediri Regency and Probolinggo Regency Based on Farmer Exchange Rates (FER)

Agriculture is an important component of the Indonesian economy and makes a significant contribution to national Gross Domestic Product (GDP). However, the poverty rate among farmers is still high, which shows the need for a more in-depth study of farmer welfare. This study focuses on Kediri Regency and Probolinggo Regency in East Java, areas known for their agricultural contributions. The aim is to assess the welfare of farmers in Kediri Regency and Probolinggo Regency. This research uses a quantitative approach, with data collected through questionnaires and interviews. The analysis used is the Farmer Exchange Rate (FER), which is determined by comparing the Price Index Received by Farmers (It) and the Price Index Paid by Farmers (Ib). The results show significant differences between the two districts, Kediri experienced an increase in FER of 0.48%, while Probolinggo experienced a decrease in FER of 2.87%. This finding is important because it reflects differences in the welfare and economic conditions of farmers in Kediri and Probolinggo. Factors such as government support, adoption of modern technology, and seasonal changes were identified as influencing these outcomes. Strategic recommendations include increasing productivity through technology and starting programs targeting young farmers. This effort aims to improve agricultural effectiveness and the overall welfare of farmers in the region.

Welfare Comparisons for Biased Learning

Welfare Comparisons for Biased Learning

Effectiveness of environmental regulations: firm’s decisions and welfare implications

In this paper, we compare four policy instruments–tax, subsidy, binding emissions and cap-and-trade, to determine which policy is the most effective and whether they are equivalent. We also examine if a firm’s policy preference differs from that of a policymaker. Our motivation stems from the global use of a wide array of pollution instruments. Using a game theoretic approach, we analyze how carbon abatement, production quantity, profitability and welfare vary between different policy tools. We find that the tax policy is equivalent to the binding emission standards while welfare comparison shows that the highest welfare is attributed to either the tax or subsidy policy depending on the levels of environmental damage. We find that both the policymaker and the firm prefer a subsidy policy under lower thresholds of environmental damage. Exploring hybrid policies, we find that a multi-part tariff contract jointly implements the socially optimal outcomes and leads to a win-win situation for both the firm and the policymaker. Our findings offer guidance for policymakers and managers to implement appropriate policies based on the degree of environmental damage and to consider using hybrid policies that achieve higher pollution abatement and improved welfare.

Is Europe faring well with growth? Evidence from a welfare comparison in the EU-15 (1995–2018)

This paper is the first to calculate welfare, measured by the Index of Sustainable Economic Welfare (ISEW), for the EU-15 countries in a standardized and comparable way. This paper does so by building on a case study for Belgium by Van der Slycken and Bleys (2023) that puts forward a “2.0 methodology” with two distinct ISEWs that deal with cross-time and cross-boundary issues. Both welfare and GDP per capita improved in the EU-15 between 1995 and 2018. Yet, there is an important divergence between welfare and GDP: over time experiential welfare per capita and the per capita benefits and costs of present activities improved by respectively 10,5% and 13,4%, which is less than one third and half of the growth in GDP per capita that grew by 32,4%. These welfare trends are mainly driven by individual consumption growth, the shadow economy and welfare losses from income inequality, which compensated about half of the welfare gains of the former two categories. The gap between welfare and GDP diverged especially after the financial crisis when welfare started stagnating. At the end of the studied period, the EU-15 had already recovered from the financial crisis from a GDP perspective, but not from a welfare view. Since welfare in 2018 was less than 2% lower than the period-maximum, there is no conclusive evidence in favor of the threshold hypothesis at the level of the EU-15. However, the fact that welfare levels in nine countries are more than 5% lower than their peak values signals a clear threshold for these countries. Yet, welfare can be increased beyond previous peaks with postgrowth policies that focus on social and ecological welfare.

Loss aversion and the welfare ranking of policy interventions

This paper develops theoretical criteria and econometric methods to rank policy interventions in terms of welfare when individuals are loss-averse. Our new criterion for “loss aversion-sensitive dominance” defines a weak partial ordering of the distributions of policy-induced gains and losses. It applies to the class of welfare functions which model individual preferences with non-decreasing and loss-averse attitudes towards changes in outcomes. We also develop new semiparametric statistical methods to test loss aversion-sensitive dominance in practice, using nonparametric plug-in estimates; these allow inference to be conducted through a special resampling procedure. Since point-identification of the distribution of policy-induced gains and losses may require strong assumptions, we extend our comparison criteria, test statistics, and resampling procedures to the partially-identified case. We illustrate our methods with a simple empirical application to the welfare comparison of alternative income support programs in the US.

Intersubstrate Welfare Comparisons: Important, Difficult, and Potentially Tractable

AbstractIn the future, when we compare the welfare of a being of one substrate (say, a human) with the welfare of another (say, an artificial intelligence system), we will be making an intersubstrate welfare comparison. In this paper, we argue that intersubstrate welfare comparisons are important, difficult, and potentially tractable. The world might soon contain a vast number of sentient or otherwise significant beings of different substrates, and moral agents will need to be able to compare their welfare levels. However, this work will be difficult, because we lack the same kinds of commonalities across substrates that we have within them. Fortunately, we might be able to make at least some intersubstrate welfare comparisons responsibly in spite of these issues. We make the case for cautious optimism and call for more research.

Uniform versus discriminatory tariffs when competition mode is endogenous

AbstractWe examine the welfare implications of two tariff regimes when firms have a forward‐looking view on trade policy. Discriminatory tariffs lead to Cournot competition, whereas uniform tariffs lead to diverse competition modes. If exporters are identical in production costs, all the trading countries are better off under the uniform rather than discriminatory tariff regime, which suggests a possibility that countries reach an agreement on the most‐favored nation (MFN) as a preferred tariff regime. For asymmetric costs among exporters; however, the competition mode determined endogenously under the uniform tariffs does matter for the welfare comparison. If Cournot competition emerges, then each country's preference is consistent with conventional wisdom. That is, the importing country and high‐cost exporters prefer a discriminatory tariff while low‐cost exporters have a uniform tariff regime. However, if the uniform regime leads to either Bertrand or asymmetric competition mode, then the cost gap between exporters would be the determinant factor. Only when the cost gap is sufficiently small, the uniform tariff, required by the MFN clause of the World Trade Organization, can be beneficial to all trading countries.

Empirical Model of Dynamic Merger Enforcement—Choosing Ownership Caps in U.S. Radio

The paper introduces a method to conduct a forward-looking antitrust review of horizontal mergers. The method utilizes a dynamic oligopoly model in which mergers, entry/exit, and product repositioning are endogenous. The model provides long-run industry trajectories with and without the merger under review, enabling the regulator to obtain dynamically robust welfare comparisons. The paper demonstrates the framework’s application to regulate the U.S. radio broadcasting industry. In particular, it investigates the long-run efficacy of two commonly used merger heuristics: radio station ownership caps (see the Telecom Act of 1996) and static merger simulations. The paper finds that raising the ownership cap results in higher total welfare and demonstrates varying long-run effectiveness of merger simulations. This paper was accepted by Mathew Shum, marketing. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4599 .

Value Judgements, Positivism and Utility Comparisons in Economics

The issue of interpersonal comparisons of utility is about the possibility (or not) of comparing the utility or welfare or the mental states in general, of different individuals. Embedded in the conceptual framework of utilitarianism, interpersonal comparisons were admissible in economics as part of the theoretical justification of welfare policies until the first decades of the twentieth century. Under the strong influence of the scientific philosophy of positivism as reflected in the works of early neoclassical economists and as epitomized by Lionel Robbins, utility comparisons were subsequently rejected as a value judgement. Robbins’ methodological stance is still prevalent among mainstream economists. Despite the explicit rejection of comparability by the majority of economists, interpersonal comparisons are necessary for many key policy issues, such as progressive taxation, social welfare policies, GDP-based welfare comparisons, cost–benefit analysis, and public goods provision. In this paper, the case of interpersonal utility comparisons is discussed as an illustrative example of the usefulness of the study of the role of value judgements, and generally of the interrelationship between ethics and economics. It is argued that the current tension between theory and policy practice might be resolved through the efforts of prominent economists and philosophers to challenge positivism, and especially its problematic treatment of value judgements and of ethical assumptions in general. The discussion also provides more strength to the view that policy makers and their economic advisers cannot avoid ethical questions in their analysis of the workings of the economic system.

Revealed Bayesian expected utility with limited data

This paper characterizes expected utility preferences with information acquisition and Bayesian updating using stochastic choice data on acts. This contrasts with research that uses state-dependent stochastic choices which is difficult to obtain outside of the laboratory. The characterization is in the spirit of the Wald-Pearce lemma and requires that there is no random deviation rule that improves ex-ante expected utility for all possible information structures consistent with the data. The result is extended to place bounds on an unknown prior and facilitate welfare comparisons in the presence of framing. These bounds are computable via linear programming. Moreover, we show that in special cases, the bounds can be found explicitly by solving a series of Bayesian persuasion games.

A theoretical approach to improving interspecies welfare comparisons

The number of animals bred, raised, and slaughtered each year is on the rise, resulting in increasing impacts to welfare. Farmed animals are also becoming more diverse, ranging from pigs to bees. The diversity and number of species farmed invite questions about how best to allocate currently limited resources towards safeguarding and improving welfare. This is of the utmost concern to animal welfare funders and effective altruism advocates, who are responsible for targeting the areas most likely to cause harm. For example, is tail docking worse for pigs than beak trimming is for chickens in terms of their pain, suffering, and general experience? Or are the welfare impacts equal? Answering these questions requires making an interspecies welfare comparison; a judgment about how good or bad different species fare relative to one another. Here, we outline and discuss an empirical methodology that aims to improve our ability to make interspecies welfare comparisons by investigating welfare range, which refers to how good or bad animals can fare. Beginning with a theory of welfare, we operationalize that theory by identifying metrics that are defensible proxies for measuring welfare, including cognitive, affective, behavioral, and neuro-biological measures. Differential weights are assigned to those proxies that reflect their evidential value for the determinants of welfare, such as the Delphi structured deliberation method with a panel of experts. The evidence should then be reviewed and its quality scored to ascertain whether particular taxa may possess the proxies in question to construct a taxon-level welfare range profile. Finally, using a Monte Carlo simulation, an overall estimate of comparative welfare range relative to a hypothetical index species can be generated. Interspecies welfare comparisons will help facilitate empirically informed decision-making to streamline the allocation of resources and ultimately better prioritize and improve animal welfare.

Welfare comparisons within and across species

One of the biggest problems in applications of animal welfare science is our ability to make comparisons between different individuals, both within and across species. Although welfare science provides methods for measuring the welfare of individual animals, there’s no established method for comparing measures between individuals. In this paper I diagnose this problem as one of underdetermination—there are multiple conclusions given the data, arising from two sources of variation that we cannot distinguish: variation in the underlying target variable (welfare experience) and in the relationship of measured indicators to the target. I then describe some of the possible methods of making comparisons, based on the use of similarity assumptions that will have greater or lesser justification in different circumstances, and the alternative methods we may use when direct comparisons are not possible. In the end, all our available options for making welfare comparisons are imperfect, and we need to make explicit context-specific decisions about which will be best for the task at hand while acknowledging their potential limitations. Future developments in our understanding of the biology of sentience will help strengthen our methods of making comparisons.

Interpersonal Comparisons of What?

I examine the once popular claim according to which interpersonal comparisons of welfare are necessary for social choice. I side with current social choice theorists in emphasizing that, on a narrow construal, this necessity claim is refuted beyond appeal. However, I depart from the opinion presently prevailing in social choice theory in highlighting that on a broader construal, this claim proves not only compatible with, but even comforted by, the current state of the field. I submit that all in all, the most accurate philosophical assessment consists not in flatly rejecting this necessity claim, but in accepting it in a suitably revised form.

Capitalism and Distributive Justice: Musings of a Mormon Economist

Capitalism and Distributive Justice: Musings of a Mormon Economist

Travel time savings vs. logsum-based welfare comparisons under an area-wide road capacity restriction

Many studies have been conducted to analyze the impact of road capacity restrictions on transportation networks. Numerous studies related to network capacity restrictions have focused on estimating the inconvenience caused by an increase in travel time as a measurement indicator for capacity restrictions occurring over a short period of time. In terms of network capacity restrictions, this study focuses on monetary loss from the perspective of economic welfare analysis. Using an agent-based model, this study analyzes the effect of disrupting all modes over the short and long term as the capacity of roads is reduced because of area-wide road capacity restrictions. Many studies have used the method of estimating inconvenience caused by increased travel time as an effect analysis, but this study uses logsum-based benefit method; benefit estimated results by the two methods are then compared. A large difference between the two benefit calculation methods was found. In detail, although there was a large loss in terms of increased travel time because of capacity reduction, despite the increase in average travel time because of the long-term change of modes, the derived consumer surplus inconvenience was relatively small because of the adjustment in the utility between modes. The effect of mode conversion was reflected in the benefits of consumer surplus from the perspective of a consumer welfare analysis. The case study showed that the scale of the inconvenience of the consumer surplus method was small because of the highly influential transport policy in small study area, where it was easy to switch between walking and cars. The present study targeted drastic policies that are expected to be quite difficult to accept socially, but a somewhat relaxed scenario analysis is also needed. In addition, it is necessary to consider inconvenient loss for changing the departure time and route in the further studies.

Representative endowments and uniform Gini orderings of multi-attribute welfare

For the comparison of inequality and welfare in multiple attributes the use of generalized Gini indices is proposed. Individual endowment vectors are summarized by using attribute weights and aggregated in a spectral social evaluation function. Such functions are based on classes of spectral functions, ordered by their aversion to inequality. Given a spectrum and a set P of attribute weights, a multivariate Gini dominance ordering, being uniform in weights, is defined. If the endowment vectors are comonotonic, the dominance is determined by their marginal distributions; if not, the dependence structure of the endowment distribution has to be taken into account. For this, a set-valued representative endowment is introduced that characterizes the welfare of a d-dimensioned distribution. It consists of all points above the lower border of a convex compact in mathbb {R}^{d}, while the set ordering of representative endowments corresponds to uniform Gini dominance. An application is given to the welfare of 28 European countries. Properties of P-uniform Gini dominance are derived, including relations to other orderings of d-variate distributions such as convex and dependence orderings. The multi-dimensioned representative endowment can be efficiently calculated from data. In a sampling context, it consistently estimates its population version.

Endogenous Noise Trackers in a Radner Equilibrium

We prove the existence of an incomplete Radner equilibrium in a model with exponential investors and an endogenous noise tracker. We analyze a coupled system of ODEs and reduce it to a system of two coupled ODEs in order to establish equilibrium existence. As an application, we study the impact of the endogenous noise tracker on welfare by comparing to a model with an exogenous noise trader. We show that the aggregate welfare in the endogenous noise tracker model is bigger for a sufficiently large stock supply, but the welfare comparison depends in a non-trivial manner on the other model parameters.

Comparison of Cattle Housing Systems Based on the Criterion of Damage to Barn Equipment and Construction Errors.

Simple SummaryAs a result of many years of use, dairy cattle barns are subject to gradual wear and degradation. Damage to technical equipment can be identified in many areas in the barn. These areas are used by dairy cattle, so it is important to recognize the problem of damage and the associated health risks for animals. The problem of damage to internal equipment (e.g., damage to the floor, partitions between lying stalls, feed ladders, drinking bowls) applies to both tie-stall and freestall barns, which are the most common in dairy farms. Such premises became an inspiration to compare barns with a tie-stall system, a freestall system and their individual areas (lying, feeding, milking and social) in terms of the amount of damage but also construction errors. Most damage per one barn was found in the feeding area of objects with a tie-stall housing system. More cow health problems (e.g., laminitis, hoof problems) were identified in the barns with the freestall housing system. Equipment failures and construction errors may disrupt efficient and animal-safe dairy production in the barn. The results of the research study may be an incentive for farmers to check the barns in terms of their technical wear.Dairy cattle housing systems are the subject of numerous studies, in which a strong emphasis is placed on the comparison of animal welfare, animal behavior, production indicators and labor inputs. Dairy cattle housing systems are linked to specific livestock buildings, which is a prerequisite for undertaking studies comparing barns and their technical equipment. The aim of the study was to compare barns with two types of housing systems, i.e., tie-stall and freestall, including the identification of technical wear in various areas used by animals. This objective was linked to the assessment of animal health problems in livestock facilities. The research covered 38 dairy farms, 19 of which kept cows in the tie-stall system and 19 in the freestall system. The barns in these farms were examined for technical damage and construction errors, assessed in four areas: lying, feeding, milking and social. The research results confirmed significant differences in the degree of damage to technical equipment in individual areas of barns and between barns with tie-stall and freestall housing systems. The conclusions indicate the need to link the degradation of barns and their technical equipment, as well as design errors with the evaluation of dairy cattle welfare in future studies.