Welfare Loss Research Articles

Resilience of Social Transfer Programs to Large Unexpected Shocks

Large, unexpected shocks are becoming more frequent, making the design of robust social transfer programs more vital than ever. We evaluate the performance of the Food Friendly Program (FFP), the largest in-kind social transfer program in Bangladesh, before and during the nation-wide COVID-19 lockdown. Using two-rounds of nationally representative household surveys combined with administrative data, we document that high leakages and large welfare losses are related to corruption. This contrasts with the performance of the pre-lockdown FFP, when leakage was low and coverage high. We then compare the performance of the FFP with two initiatives launched following the pandemic: an in-kind and cash transfer program, respectively. These programs have markedly higher levels of leakage than the FFP. Our findings are relevant to other large shocks, such as those caused by climate change, and have important policy implications for the design and delivery of transfer programs in developing countries characterized by institutional weaknesses.

Ayrışma’dan Risk Azaltma’ya: Batı ile Çin Arasındaki Ticarette Yeni Dönem

Since the Second World War, the welfare level of world societies has increased with the peace period brought by economic interdependence and the acceleration of globalization. However, the 2008-09 financial crisis, strained relations between the USA and China, the global pandemic, the Russia-Ukraine War and geopolitical tensions continue to negatively affect international trade and the global economy. Western and allied countries have experienced the effects of their dependence on the supply chains of countries with which they have bad diplomatic relations, in major shocks. Governments and policymakers of Western developed countries, especially the US, stated that it would be in line with national security interests for companies to move their production to allied -friendshoring- countries. Decisions taken by policy makers in the world’s developed economies have also prompted businesses to take new steps.
 In this study, which was prepared using secondary data, the economic decoupling of the US and allied countries from China was examined and concluded that the complete decoupling of economies will disrupt the world's economic stability and lead to a loss of global welfare.

Bank bailouts: Moral hazard and commitment

This paper investigates moral hazard from bank bailouts and its welfare implications. The traditional channel of moral hazard in existing literature arises from banks offering excessively attractive deposit contracts that lead to inefficiently large bailouts when there is a run. This paper introduces a new, second channel of moral hazard: bailouts discourage banks from offering deposit contracts that deter panic-based runs. It also identifies when the second channel is active, and decomposes the welfare losses contributed by the two channels. Whenever the second channel is active, commitment on the bailout policy alone is unable to fully eliminate the welfare loss from moral hazard. Alternative regulations such as controlling short-term interest rates offered by banks are necessary to achieve efficiency. Additionally, the second channel can cause welfare to be increasing with the probability of bank runs. The increased run probability helps encourage banks to offer run-proof contracts, easing the necessary effort from the fiscal authority to intervene.

Economic Analysis of the Responsibility of Social Networks

This research analyzes what are the effects of a stricter intermediary liability standard, where social networks are responsible for user-generated content before a court decision or order. Our estimates show large potential losses of at least BRL 47 million in revenue per year and BRL 23 billion in market value. Furthermore, from the users' point of view, we estimate annual losses in consumer welfare due to a stricter intermediary liability standard of between BRL532 million and BRL4.1 billion. The research concludes that there is no evidence that such a change would improve content removal policies or economic well-being. In fact, this can lead toconsiderable losses for platforms, merchants and consumers alike.

On the design of effective sanctions: the case of bans on exports to Russia

Abstract We build on Baqaee and Farhi (2019, 2021) and derive a theoretically grounded criterion that allows targeting bans on exports to a sanctioned country at the level of ∼5,000 six-digit HS products. The criterion implies that the costs to the sanctioned country are highly convex in the market share of the sanctioning parties. Hence, there are large benefits from coordinating export bans among a broad coalition of countries. Applying our results to Russia reveals that sanctions imposed by the European Union and the United States in response to Russia’s invasion of Ukraine are not systematically related to our arguments once we condition on Russia’s total imports of a product from participating countries. We discuss drivers of these differences and then provide a quantitative evaluation of the export bans to show that (i) they are very effective with the welfare loss typically ∼100 times larger for Russia than for the sanctioners; (ii) improved coordination of the sanctions and targeting sanctions based on our criterion allows to increase the costs to Russia by about 80% with little to no extra cost to the sanctioners; and (iii) there is scope for increasing the cost to Russia further by expanding the set of sanctioned products.

Ruminal Acidosis Part II: Diagnosis, Prevention and Treatment

Ruminal acidosis is presented as the most significant nutritional disorder of ruminants with severe impact on animal health, welfare and considerable economics losses in ovine and bovine herds. The disease is presented in two forms Acute Ruminal Acidosis (ARA) and Sub-Acute Ruminal Acidosis (SARA). This second part of the Ruminal Acidosis review focuses on the diagnosis, prevention, and treatment. The diagnosis of SARA presents several difficulties due to the non- clinically patent symptoms. Prevention and treatment are based on the amelioration of nutrition including the use of dietary supplements, and antimicrobial administration as well as the improvement of management practices.

Welfare effects from food price shocks and land constraints in Niger

Households in low-income and food insecure nations such as Niger are vulnerable to food price shocks as a large portion of their budgets are spent on calories derived from cereals and other staples. However, there is very weak understanding of the structure of food demand in many African nations making proactive food policy recommendations ineffective. This is particularly acute in West Africa where the paucity of quantitative expenditure and consumption information has forced some studies to borrow demand parameters from other low-income nations located in regions outside of Sub-Saharan Africa. We empirically estimate food demand elasticities as tools to conduct a short-run welfare analysis of price shocks and build upon the welfare impacts to assess long-run pressure on farmland and trajectories toward future availability and price scenarios. The welfare analysis finds that an increase in millet price reduces rural welfare while a sorghum price increase primarily reduces urban households’ welfare. Given population growth, acreage-driven millet and sorghum production growth, and the income elasticities for both staples, holding all else constant, any food price shock in the future will likely result in higher welfare losses for consumers. Taken together, food price policy should focus on millet to improve the welfare of rural and the poorest households in Niger. Facing a land frontier constraint reinforces calls for total factor productivity growth in millet and sorghum to reduce pressure on marginal land. Technological change in food production and the identification of import opportunities are required to relieve upward pressure on prices given current consumption patterns, trade, land frontier constraints, and the importance of these two crops in the national food system.

Consequences of ecological aggregation in general equilibrium analysis of perturbed ecosystems

A computable general equilibrium (CGE) model is linked with a spatially explicit model of the Lake Michigan ecosystem to assess welfare impacts of the current threat of Bigheaded carp, a non-indigenous aquatic invasive species (AIS) projected to have spatially explicit and species-specific impacts on the ecosystem. Disaggregating to model spatial decisions and spatially explicit species compositions in general equilibrium frameworks comes at a cost of additional complexity and data requirements. Whether these investments are worth the effort over extant ecological aggregations is the focus of this analysis, as typical methods consider spaceless aggregations across locations and aggregate over species. Here, the implications of aggregating over space and/or species are quantified. Results signal welfare losses from the bigheaded carp invasion, and that aggregating over one/both dimensions may miss important bioeconomic tradeoffs especially with respect to species.

Fermented calcium butyrate supplementation in post-peak laying hens improved ovarian function and tibia quality through the “gut-bone” axis

The compromised egg quality and leg abnormality during the end of the laying cycle (after 40 weeks) have been leading to poor animal welfare and substantial economic losses. Therefore, the effects of fermented calcium (Ca) butyrate, produced by fermentation by Clostridium butyricum, on production, eggshell quality, and tibial property of hens were explored. A total of 192 Hy-line brown laying hens at 50-week-old were assigned to a basal diet or the basal diet with 300 mg/kg of the fermented Ca butyrate from 50 to 58 weeks of age. Each treatment had 6 replicates with 16 hens each. The diet supplemented with 300 mg/kg fermented Ca butyrate notably increased egg weight, ovarian follicle number, and eggshell strength (P = 0.072) as compared to the basal diet, which were associated with cytokine secretion, toll-like receptor signaling pathways, and intestinal immunity based on the RNA-seq data from the granulosa. Dietary Ca butyrate inclusion decreased the expression of ileal tumor necrosis factor-alpha and serum pro-inflammatory cytokine concentration, as well as increased the content of serum immunoglobulin A when compared to the basal diet (both P < 0.05). The birds that received fermented Ca butyrate diets exhibited higher villus height (P < 0.05) and upregulated expression of tight junction proteins, whereas it did not alter the composition of cecal microbiota (P > 0.05). In addition, the diet with fermented Ca butyrate reduced the number of osteoclasts in the proximal tibia and the level of C-terminal cross-linked telopeptide of type I collagen, a bone resorption marker (P < 0.05), whereas it tended to increase the concentration of the procollagen type I N-terminal propeptide that reflects bone formation marker in serum. Moreover, the layers fed fermented Ca butyrate diets possessed higher (P < 0.05) bone area and trabecular number of the proximal tibia, yield load, and ultimate load than those that consumed basal diets. Collectively, dietary fermented Ca butyrate supplementation in post-peak layer diets improved the ovarian function and tibia quality, which might be related to enhancing intestinal integrity and consequently decreasing inflammation mediated bone resorption.

Green bonds, transition to a low-carbon economy, and intertemporal welfare allocation: Evidence from an extended DICE model

&lt;p&gt;Short-term reductions in social welfare, expected to be caused by a currently imposed carbon tax, are among the obstacles to a rapid transition to a low-carbon economy. Using an extended DICE model, we studied the potential of green bonds to both accelerate this transition and smoothen welfare losses and gains in a socially optimal way. We showed that green bonds can indeed accelerate the transition to a low-carbon economy and that lower interest rates on bonds speed up this acceleration. Moreover, bonds can reduce short-term welfare losses; however, to eliminate welfare losses, additional compensation mechanisms are needed. For example, bonds at a 3% interest rate can decrease the peak atmospheric carbon concentrations by about 20% and shorten the initial time, during which society is worse off from 75 to 45 years. Retaining at least the same consumption level as in the no-mitigation scenario, without using bonds, is possible only through a decrease in abatement efforts. Green bonds of sufficiently low interest rates allow improving intertemporal welfare as well as achieving a more pronounced climate change mitigation with respect to both mitigation and no-mitigation scenarios without bonds.&lt;/p&gt;

Environmental investment timing and dual government incentives under uncertain carbon allowances

The government's post compliance cycle announcement of carbon allowances hampers firms from obtaining accurate information. Firms must estimate carbon allowances before determining the optimal environmental investment timing. Typically, firms prioritize environmental investments by introducing environmental equipment during the compliance cycle (ID) when their estimated carbon allowances are low. Conversely, they prefer to make environmental investments after the compliance cycle (IA) by purchasing carbon credits to offset excess emissions. This study aims to present a process and outcomes for firms to accurately select the timing of environmental investments based on estimated carbon allowances. Moreover, their improper timing can lead to a loss in government social welfare. To mitigate the loss, the dual government incentives of commitment and subsidies are further introduced. Contrary to the intuition that low carbon estimates would lead to an ID decision, firms should choose IA due to the higher costs and shorter lifespan for introducing environmental equipment or lower carbon prices. Generally, the government sets the least strict carbon allowances that still achieve the desired incentives while staying within the permissible spectrum of environmental preservation. However, for firms that face high market demand but experience reduced production due to technological or cost constraints, the government should provide subsidies to encourage them to adopt alternative investment timing. This will ensure product supply, maintain firm profits, and enhance social welfare.

Bacterial chondronecrosis with osteomyelitis lameness in broiler chickens and its implications for welfare, meat safety, and quality: a review.

The exponential increase in global population continues to present an ongoing challenge for livestock producers worldwide to consistently provide a safe, high-quality, and affordable source of protein for consumers. In the last 50years, the poultry industry has spearheaded this effort thanks to focused genetic and genomic selection for feed-efficient, high-yielding broilers. However, such intense selection for productive traits, along with conventional industry farming practices, has also presented the industry with a myriad of serious issues that negatively impacted animal health, welfare, and productivity-such as woody breast and virulent diseases commonly associated with poultry farming. Bacterial chondronecrosis with osteomyelitis (BCO) lameness is one such issue, having rapidly become a key issue affecting the poultry industry with serious impacts on broiler welfare, meat quality, production, food safety, and economic losses since its discovery in 1972. This review focuses on hallmark clinical symptoms, diagnosis, etiology, and impact of BCO lameness on key issues facing the poultry industry.

Predicting social assistance beneficiaries: On the social welfare damage of data biases

Abstract Cash transfer programs are the most common anti-poverty tool in low- and middle-income countries, reaching more than one billion people globally. Benefits are typically targeted using prediction models. In this paper, we develop an extended targeting assessment framework for proxy means testing that accounts for societal sensitivity to targeting errors. Using a social welfare framework, we weight targeting errors based on their position in the welfare distribution and adjust for different levels of societal inequality aversion. While this approach provides a more comprehensive assessment of targeting performance, our two case studies show that bias in the data, particularly in the form of label bias and unstable proxy means testing weights, leads to a substantial underestimation of welfare losses, disadvantaging some groups more than others.

Universal Basic Income: A Dynamic Assessment

Universal basic income (UBI) is an increasingly popular policy proposal, but there is no evidence regarding its longer-term consequences. We find that UBI generates large welfare losses in a general equilibrium model with imperfect capital markets, labor market shocks, and intergenerational linkages via skill formation and transfers. This conclusion is robust to various alternative ways of financing UBI. By using observationally equivalent models that eliminate different sources of endogenous dynamic linkages (equilibrium capital market and parental investment in child skills), we show that the latter are largely responsible for the negative welfare consequences. (JEL H24, H31, I38, J22, J24, J62)

A dynamic model of rational “panic buying”

This paper analyzes panic buying of storable consumer products accompanied by disasters, using a novel consumer‐search theoretic equilibrium model where consumers follow ( S, s) inventory policies. We show that, even if consumers are fully rational, an anticipated temporary increase in consumer shopping costs (as well as conventional demand and supply shocks) can trigger an upward spiral of hoarding demand and result in serious shortages. Due to congestion externalities, panic buying leads to the misallocation of storable products and substantial welfare loss. The model is calibrated using survey data and reveals that the timing of recognizing the shopping‐cost rise is crucial for the severity of panic buying. Some policy options, such as purchase quotas and future sales‐tax reductions, are suggested to mitigate panic buying.

External Shocks and Business Cycles in Nigeria: Accounting for the Roles of Domestic Oil-Refining Alternative and Oil Price Fiscal Rule

The paper investigates the role of oil price fiscal rule (OPFR), and functional domestic oil refineries in curtailing the effects of external shocks on the Nigerian economy. A dynamic stochastic general equilibrium (DSGE) model is developed, calibrated and estimated using Random Walk Metropolis sampling method. The model is estimated under the benchmark, OPFR-only, and refinery-only scenarios. The results reveal that building or revamping domestic oil refineries may help the economy to withstand long term shock, but in the short run, the OPFR clearly emerges as the most potent. The non-oil external shocks are not significant under the three scenarios. However, oil-related external shocks have significant implications for business cycles in Nigeria, reinforcing the demand- and supply-side shocks. Furthermore, it is found that there is a need for functional domestic oil refineries in insulating the economy against external shocks, however, there is a huge welfare loss associated with refinery development alone. Thus, policymakers should consider instituting the OPFR to stem external shocks in the short run, while building oil refineries to tackle external shocks in the long run.

The distributional impact of fiscal measures to compensate for consumer inflation in Greece in 2022

This paper analyses the distributional implications of consumer inflation in Greece and of the fiscal measures adopted to cushion its adverse impact on households in 2022. The analysis employs the tax-benefit microsimulation model for the European Union (EUROMOD) to study how inflation, income support measures, as well as measures aimed at containing prices affected households’ purchasing power and welfare across the income distribution. The study confirms that the purchasing power of lower-income households was more severely affected by the 2022 inflation surge than that of higher-income households, resulting in the so-called inflation gap. The unequal impact of inflation was further magnified by the high shares of consumption in the income of the poorer, resulting in a welfare loss differential of 9.2 percentage points between the bottom and the top income decile. The adverse distributional impact of the inflationary shock was largely offset by government policies, with a welfare loss of only 2.9% remaining for the population as a whole. Fiscal measures were shown to close the inflation gap and mitigated the welfare loss differential between the poor and the rich to just 0.7 percentage points. Price measures were dominant vis-à-vis their income counterparts in compensating for welfare losses across the income distribution and, most interestingly, had a significant progressive impact largely driven by the electricity subsidy, as the support provided was inversely related to consumption. However, given that they were not as well-targeted to low-income households, they were relatively cost-inefficient when compared with income measures. Nonetheless, the efficiency advantage of income measures may be severely undermined in the presence of extensive tax evasion, which points not only to the need for a careful design of targeted measures, but also to complementarities with structural reforms fighting tax evasion.

GENOMICS AS A TOOL FOR IMPROVING DAIRY CATTLE POPULATIONS

The dairy industry plays a pivotal role in meeting the global demand for high-quality milk and dairy products. To address the ever-increasing need for efficient and productive dairy cattle populations, the integration of genomics has emerged as a transformative tool. Genomic selection, a revolutionary advancement in cattle breeding, has allowed for the identification of superior individuals at an early age based on their genetic potential. Genomic selection has not only accelerated genetic progress but has also minimized generation intervals, leading to more efficient breeding programs. Furthermore, the incorporation of genomic data in selection decisions has increased the accuracy of breeding values, ultimately resulting in the production of dairy cattle with improved milk yield, fertility, and disease resistance. Beyond traditional breeding goals, genomics has also enabled the identification of genetic variants associated with traits that are difficult to measure, such as feed efficiency, heat tolerance, and environmental adaptability. By deciphering the genetic basis of these traits, it is now possible to develop breeding strategies that enhance the resilience of dairy cattle populations in the face of changing environmental conditions. This paper also explores the role of genomics in addressing health and welfare concerns within the dairy industry. Genetic markers associated with susceptibility to diseases and stress-related conditions have been identified, providing opportunities to select for healthier and more resilient animals. Furthermore, genomics has opened avenues for tailoring nutritional strategies to individual cattle based on their genetic predispositions, optimizing feed efficiency and reducing environmental impacts. The utilization of genomic data is not limited to breeding and production. Genomics has facilitated the development of innovative tools for managing dairy cattle populations. Precision management, including genomic-based early disease detection and personalized healthcare, is becoming increasingly viable, enhancing animal welfare and reducing production losses. In conclusion, genomics has revolutionized dairy cattle breeding and management by providing accurate and efficient tools for selecting animals with superior genetic potential, improving production, health, and welfare, and enhancing the overall sustainability of dairy cattle populations. As genomics continues to evolve, the dairy industry stands to benefit from a more precise and sustainable approach to cattle production, ensuring a resilient and productive future for the dairy sector.

Endogenous growth and human capital accumulation in a data economy

We build an endogenous growth model featuring a new mode of human capital accumulation in a data economy. Data are generated as the byproducts of economic activities and then used by consumers for human capital accumulation apart from education. Although we find similar growth patterns compared with those in the related literature, economic growth is further accelerated by the new use of data factor. Quantitative analyses suggest that although the accumulation of human capital is promoted by the increasing importance of data, this promotion is not unlimited since data may over-absorb resources and crowd out education. In the transition dynamics, we see that consumers suffer temporary welfare loss. However, as data become a key factor in human capital accumulation, welfare ultimately increases. Our paper provides a first view of the effect of the data factor in the process of human capital accumulation.

The impact of strain and cage type on the welfare of laying hens in different seasons

The aim of this study was to determine the effects of strain and cage type on the welfare of laying hens in commercial flocks over different seasons. A 2 x 2 x 3 factorial design was used to evaluate the effects of strain (white and brown layers) and cage type (conventional and enrichable battery cages) on the welfare of laying hens over three seasons (winter, spring and summer). The Welfare Quality® Assessment Protocol for Poultry was used to assess the welfare of laying hens. The strain and cage type significantly affected the welfare of the laying hens, which varied according to the season. Hens from the brown strain exhibited higher occurrences of FPD, keel bone abnormalities, and feather loss on the head and neck. White strains displayed a greater percentage of hens with abnormalities in the toe, comb, and beak, along with pecking wounds on the comb and extensive feather loss on the back, rump, and belly. A higher prevalence of comb abnormalities was observed in conventional cages. Hens in enrichable cages had higher rates of FPD, toe, comb and beak abnormalities, as well as pecking wounds on the comb and extensive feather loss. As a result, it was concluded that enrichable cages have a more adverse impact on the welfare of laying hens, with welfare losses in enrichable cages being more pronounced in brown hens compared to white hens and with interactions between strain and cage type varying seasonally.