Welfare Reducing Research Articles

Media, Fake News, and Debunking

We construct a Hotelling-type model of two media providers, each of whom can issue and/or real and each of whom can invest in the debunking of their rival's news. The model assumes that consumers have an innate preference for one provider or the other and value real news. However, that valuation varies according to their bias favoring one provider or the other. We demonstrate a unique subgame perfect Nash equilibrium in which only one firm issues and we show, in this setting, that increased polarization of consumers - represented by a wider distribution - increases the prevalence of both and debunking expenditures and is welfare reducing. We also show, interalia, that a stronger preference by consumers for their preferred provider lowers both and debunking. Finally, we compare monopoly and duopoly market structures in terms of fake news provision and show that a public provider can be welfare improving.

A Computable General Equilibrium Analysis of Brexit: Barriers to Trade and Immigration Restrictions

This paper estimates the economic effects of different types of restrictions on trade and immigration in the United Kingdom after Brexit. Regarding trade restrictions, we focus on UK–EU increases in tariffs and non‐tariff barriers. We also analyse the removal of all tariffs in the UK to all its trading partners. Concerning immigration, we run a 5‐year cumulative annual reduction in net migrants by 87,000 workers following OECD estimations, which looks realistic even if there is a hard Brexit. The study is conducted using a computable general equilibrium (CGE) model, which allows us to estimate the impact on GDP, welfare, wages and capital remuneration, together with the evolution of aggregate and sectoral output, exports and imports. We obtain a more sizeable negative impact on the UK than other previous influential studies. Trade restrictions would generate welfare reductions between −0.38% and −1.94% for the UK, while they would be between −0.03% and −0.14% in the EU. This is because the EU is a crucial trade partner for the UK, which cannot be easily substituted through trade with other regions in the world. We simulate the impact of both reductions in net inflows and in the stock of EU migrants, accumulated through 5 years. Migration is compatible with wage increases but puts downward pressure on GDPpc. However, migration restrictions would not compensate the overall GDPpc contractions arising from a hard Brexit.

Flexible or Mandatory Retirement? Welfare Implications of Retirement Policies for a Population With Heterogeneous Health Conditions

A flexible retirement policy has often been proposed as a solution to address the social dilemma of individuals in the population having different desired retirement ages. We analyze such a policy in an overlapping generations general equilibrium framework, where individuals differ in terms of their health condition at the standard retirement age, and therefore in their suitability for remaining in the labor force beyond the standard age. In our model, workers know about their future health condition when they are young, and adjust their savings and labor supply accordingly in order to maximize their lifetime utility. The applies to situations in which workers can fairly accurately predict their health status based upon personal, family, community and professional health status tendencies. We compare the flexible retirement policy to the mandatory retirement policy in the labor and capital markets, and the effects on savings and wages in the aggregate for both healthy and unhealthy, young and elderly cohorts. For economies with sufficiently high capital intensity of production and high levels health among the elderly, a flexible retirement policy can result in a welfare reduction compared to a mandatory retirement policy. Our study links the social desirability of the two retirement policies to the technological and population structure of the economy.

Effects of Customers' Environmental Awareness and Environmental Regulations on the Emission Intensity and Price of a Product

ABSTRACTWe study the effects of customers' environmental awareness (CEA) and environmental regulations on the emission intensity and price of a product with a price‐ and carbon emission‐sensitive demand. First, we consider a continuous setting where the production policy can be adjusted to reach any desired level of emission intensity while considering either a carbon tax or a carbon cap policy. Second, we consider a discrete framework where each production policy is defined by a given amount of emission intensity, a unit production cost, and a fixed investment cost. Under both settings, we study the joint effect of CEA and environmental regulations on a firm's optimal policy. We compare the customer‐driven model (when demand is sensitive to price and emissions but without a carbon tax) to the taxation‐only model (when a carbon tax applies but demand is only sensitive to price).Our main results indicate that CEA is an efficient driver for better environmental performance, acting as a substitute for a carbon tax but, unlike a carbon tax, leading to a lower price for the customers. In addition, we demonstrate that the nonmonotonous effect of a carbon tax on production policy selection, which is a known result in the literature, is no longer valid if one considers CEA. From a social welfare perspective, we show that simultaneously increasing the carbon tax and CEA generally leads to a reduction of social welfare. We perform robustness tests and show that most of our findings are valid under different assumptions regarding demand and cost functions.

A Spatially Accurate Method for Evaluating Distributional Effects of Ecosystem Services

The value of most ecosystem services invariably slips through national accounts. Even when these values are estimated, they are allocated without any particular spatial referencing. Little is known about the spatial and distributional effects arising from changes in ecosystem service provision. This paper estimates spatial equity in ecosystem services provision using a dedicated data disaggregation algorithm that allocates ‘synthetic’ socio-economic attributes to households and with accurate geo-referencing. A GIS-based automated procedure is operationalized for three different ecosystems in Israel. A nonlinear function relates household location to each ecosystem: beaches, urban parks and national parks. Benefit measures are derived by modeling household consumer surplus as a function of socio-economic attributes and distance from the ecosystem. These aggregate measures are spatially disaggregated to households. Results show that restraining access to beaches causes a greater reduction in welfare than restraining access to a park. Progressively, high income households lose relatively more in welfare terms than in low income households from such action. This outcome is reversed when distributional outcomes are measured in terms of housing price classes. Policy implications of these findings relate to implications for housing policies that attempt to use new development to generate social heterogeneity in locations proximate to ecosystem services.

Pricing strategies for port competition and cooperation

ABSTRACTThis paper analyzes the effects of integration between two neighbor ports with a third port sharing the same overlapping hinterland. The merger (integrated port) can select either the price discrimination or uniform pricing strategy after integration. Our study reveals that port integration is always beneficial to the merger and the third port, but results in the reduction of consumer surplus and social welfare, regardless of the type of pricing strategy implemented. Further analysis shows that when the inland transportation cost to the ports is relatively low or sufficiently high, a better option is for the merger to adopt the price discrimination strategy. When port pollution is considered and has a relatively large impact, the integration of the two ports improves green social welfare for the region. This finding provides strong support for the ongoing port integration in China. In terms of pricing strategy, the uniform pricing strategy generates higher green social welfare when both inland transportation cost and pollution are relatively low, or both are significantly high. Otherwise, the price discrimination strategy generates the best result for the region.

Differenze di genere e percezione delle diseguaglianze economiche in Europa

The study analyses, from a gender perspective, the changes in individual inequality perceptions among some European countries according to their different welfare systems during the period running from the beginning of the nineties, from the last century, to the end of the last decade. The study starts with the idea that socio-economic inequalities, deriving from the long-time austerity period, are linked to individual perceptions of inequality. The hypothesis is that these feelings have increased during the last two decades, but in a different way between genders as a consequence of the effects of the welfare reduction on the opportunities and resources of women and men. The analysis includes a group of European countries with different welfare systems: Swedish for the socialdemocratic model, United Kingdom for the liberal one, Germany for the conservative model and Italy for the familistic model. The analysis has been conducted using a longitudinal perspective on the social inequality surveys of the International Social Survey program carried out in 1992 and 2009.

The price of ‘one person, one vote’

I study the design of binary voting rules in environments where agents are heterogenous either in the stakes that they have in the decision or in the quality of information they possess regarding the correct course of action. The price of ‘one person, one vote’ is defined as the reduction in welfare resulting from constraining the voting rule to treat the agents symmetrically. I analyze how this price depends on the parameters of the environment, particularly on the level of heterogeneity in the society. The results shed light on the tradeoff between equality and efficiency in the context of constitutional design.

Perceptions of youth about the integration of natural resource economics through environmental education in schools: a realist social perspective

The purpose of this paper is to delineate the perceptions of grade 12 students about the integration of environmental economics through environmental education into the South African Curriculum and Assessment Policy Statement (CAPS). Margaret Archer’s (1995) Realist social theory (RST): the morphogenetic approach provides the meta-theoretical framework that informs this study. RST deals with the concepts of structure, culture, agency, pre-existing structures, position-practice systems and mechanisms that have impact on the economic growth and welfare of the society. Data was collected through focus-group interviews with ten students who were purposefully selected from a classroom of 80 students. In addition, a qualitative research approach was used in this study to describe perception of youth about proper utilisation of scarce natural resources. The inductive analysis approach was used to interpret raw data sourced from the participants.The results of this paper revealed that even though youth have been taught principles of environmental education which consist of natural resource economics as a cross-curricular topic, some do not appreciate the importance of efficient use of natural resources in the reduction of poverty and welfare of future generation. Further, the youth believe that environmental issues such as land degradation, water and air pollution, and improper solid waste disposal can be alleviated through activities that can be done outside the classroom. However, some participants noted that the local government has to provide financial support for programmes that encourage natural resource sustainability in the schools.

Review of Literature on Foreign Aid Granted to Developing Nations and the Determination as to Whether Aid Pose Challenges to Developing Nation's Sovereignty

The role of foreign aid in assisting nations that are grappling with conflicts, non-democratic regimes, under-development amongst other malaises has been questioned by several scholars. The debate has been structured as to whether foreign aid achieves its objective/s without other unintended consequences to the developing nations, such as the interference in local issues which result in the compromised sovereignty. This essay reviewed related literature on foreign aid and its challenges to developing nation’s sovereignty. On the basis of the conducted assessment, the essay concluded that there cannot be blanket funding without any conditions as some of the opponents seem to be demanding. Conditionality’s around human rights, around good governance, around women empowerment amongst others are deemed necessary and fair. However, conditionality’s around the reduction or eradication of social welfare and trade policies that are detrimental to the recipient nation are unfair. Further, imposing similar condition’s right across without taking into account the fundamental differences within the recipient nations is also unfair. The conclusion in this regard is that foreign aid does pose a challenge to the sovereignty of recipient nations. Evidence as provided by the opponents of foreign aid points to the fact that foreign aid does lead to interference and thereby seeking to divert policy (trade or otherwise) away from what the intentions of the recipient nations are. Those that are in the neutral will argue that interference would only impact policy autonomy but not the state’s right to rule’. Our view is that the inability to self-determine and have your policies dictated somewhere dilutes your right to rule which in essence undermines your sovereignty.

Macro Shocks and Micro Woes: Short-Term Effects of India's Demonetization on the Poor

This study analyses and estimates the impact of demonetisation on the welfare of poor households in the Sundarbans region of India. Using a unique high frequency (weekly) data set collected during the process of demonetisation, we estimate that household welfare is reduced by INR 1,414 (US $ 20.8), equivalent to about 15.6% of income over the two months post demonetisation. Short-term welfare reductions happen through increased unemployment, losses to income and savings, and the opportunity costs of exchange. Our analysis shows that immediately after demonetisation, households adopted a range of strategies to rid themselves of unwanted currency notes, including increased consumption-related purchases, a reduction in borrowing and increased instances of loans. We find evidence that consumption levels and borrowing fall continuously, but consumption expenditures remain stubbornly high two months after the shock. Local income and remittances are affected heterogeneously by the shock, with households experiencing unemployment and female-headed households losing out more. The results shed light on how low income households use the limited tools at their disposal to deal with shocks, as well as the need to carefully consider how national monetary policy, however well intentioned, may adversely affect the welfare of vulnerable households. Our findings have important policy implications not only in the context of India but for governments in other developing countries thinking of adopting similar policies.

Imperfect Price Competition in Networks

Network structures play a fundamental role in the modern economy. Examples vary from communication and transportation networks to supply chains and intermediation activities. Despite the economic relevance of these markets, the theoretical literature lacks an adequate framework to study price competition in these complex environments. In this paper we develop a model of imperfect price competition in networks. Our approach maps traditional concepts of market demand, market power and double marginalization into networks. We make three main contributions. First, we show the existence and uniqueness of an equilibrium price for a general class of networks. Second, we develop several comparative statics results which highlight the role of the network topology. Finally, we show that, contrary to traditional wisdom, vertical integration in networked markets may lead to a reduction in social welfare and outcomes that are not Pareto superior.

Competition in Electricity Markets with Renewable Energy Sources

ABSTRACT This paper studies the effects of the diversification of energy portfolios on the merit order effect in an oligopolistic energy market. The merit order effect describes the negative impact of renewable energy, typically supplied at the low marginal cost, to the electricity market. We show when thermal generators have a diverse energy portfolio, meaning that they also control some or all of the renewable supplies, they offset the price declines due to the merit order effect because they strategically reduce their conventional energy supplies when renewable supply is high. In particular, when all renewable supply generates profits for only thermal power generators this offset is complete — meaning that the merit order effect is totally neutralized. As a consequence, diversified energy portfolios may be welfare reducing. These results are robust to the presence of forward contracts and incomplete information (with or without correlated types). We further use our full model with incomplete information to study the volatility of energy prices in the presence of intermittent and uncertain renewable supplies.

The political economy of food price policy during the global food price crisis of 2006-2008

This paper finds support for seven political economy hypotheses that influenced governments’ policy choices during the 2006–2008 global food price crisis. Governments focused most heavily on consumer and trade policies rather than on policies designed to increase production. They also preferred policy changes with lower implementation costs, implying that responses to past crises were the best predictor of future actions. To explain the variety of responses and policy failures, a framework is proposed that locates policies along the twin dimensions of unitary vs. fragmented decision-making processes and social welfare maximizing vs. self-interested policy goals. Many of the common policy responses can be explained by a benchmark model of unitary decision makers seeking to increase social welfare. In contrast, fragmented government decision-making, uncertainty, and self-interest generate policy and implementation failures, significant departures from the benchmark model, and reductions in social welfare. Mistrust between government and the private sector causes a lack of transparency, which fuels mistrust and uncertainty, leading to additional policy and implementation failures.

Capacity Remuneration Mechanisms for Reliability in the Integrated European Electricity Market: Effects on Welfare and Distribution through 2023

A reduced attractiveness of investments in reliable fossil power plants in liberalized markets on the background of a transition towards renewable energies has brought a discussion on capacity policies to Europe. I develop a partial equilibrium model to compare effects of three polar capacity remuneration mechanisms (CRMs) based on the assumption that a CRM is indicated. A strategic reserve (SR) policy with administratively set capacity targets, a capacity market (CM) based on public procurement, and a decentralized reserve market with the obligation of generators to finance reserves in relation to their peak supply (RM). Substantial differences of policies arise across countries and regarding consumers and producers due to power plant structures. By 2023, we find the decentralized RM to induce least pronounced distributional effects and only modest welfare reductions, while SR and CM induce higher losses. In the longer term until 2033, welfare results differ less pronounced, although the RM is most friendly to consumers. A robust policy conclusion has to pay attention to further aspects concerning the environment and technological developments.

Optimal v. simple financial policy rules in a production economy with “liability dollarization”

We evaluate the effectiveness of financial policy rules in a small open economy with production, liability dollarization and “unconventional shocks” (global liquidity shifts and news about future fundamentals). Tradable and nontradable final goods are produced with tradable inputs. Debt is denominated in units of tradables and cannot exceed a fraction of the market value of total income. Optimal policy has a macroprudential or ex-ante component (a debt tax levied at date t only when the credit constraint may bind at t+1), and ex-post components (sectoral production taxes/subsidies used when the constraint binds). The optimal policy reduces sharply the frequency and severity of financial crises but is also very complex. Simple policies are less effective and can be welfare reducing.

Health capital accumulation, health insurance, and aggregate outcomes: A neoclassical approach

Over the past two decades, medical expenditure growth in the US has outpaced GDP growth by over 1.3% annually. To date, the literature has primarily focused on explaining the rapid rise in medical consumption relative to output, with only limited attention given to understanding the long-run macroeconomic implications of this trend. In this study, I modify the standard Neoclassical growth framework to include health capital accumulation, public and private health insurance, and GHH utility. After calibrating the model to match US data for the period 1996–2013, I systematically investigate the response of output, physical and health capital, medical and non-medical consumption, and household time allocation to one-time exogenous shocks to various potential determinants of medical expenditure growth. I find that a 10% increase in final goods and medical sector productivity shocks each have a positive effect on aggregate welfare. On the other hand, a 10% increase to the endogenous depreciation rate of health capital, or to either the public or the private health insurance share are all found to be welfare reducing.

Congenital Malformations in River Buffalo (Bubalus bubalis).

Simple SummaryCongenital malformations (due to genetic causes) represent a hidden danger for animal production, above all when genetic selection is undertaken for production improvements. These malformations are responsible for economic losses either because they reduce the productivity of the farm, or because their spread in the population would decrease the total productivity of that species/breed. River buffalo is a species of increasing interest all over the world for its production abilities, as proved by the buffalo genome project and the genetic selection plans that are currently performed in different countries. The aim of this review is to provide a general view of different models of congenital malformations in buffalo and their world distribution. This would be useful either for those who performed buffalo genetic selection or for researchers in genetic diseases, which would be an advantage to their studies with respect to the knowledge of gene mutations and interactions in this species.The world buffalo population is about 168 million, and it is still growing, in India, China, Brazil, and Italy. In these countries, buffalo genetic breeding programs have been performed for many decades. The occurrence of congenital malformations has caused a slowing of the genetic progress and economic loss for the breeders, due to the death of animals, or damage to their reproductive ability or failing of milk production. Moreover, they cause animal welfare reduction because they can imply foetal dystocia and because the affected animals have a reduced fitness with little chances of survival. This review depicts, in the river buffalo (Bubalus bubalis) world population, the present status of the congenital malformations, due to genetic causes, to identify their frequency and distribution in order to develop genetic breeding plans able to improve the productive and reproductive performance, and avoid the spreading of detrimental gene variants. Congenital malformations most frequently reported in literature or signaled by breeders to the Department of Veterinary Medicine and Animal Production of the University Federico II (Naples, Italy) in river buffalo are: musculoskeletal defects (transverse hemimelia, arthrogryposis, umbilical hernia) and disorders of sexual development. In conclusion this review put in evidence that river buffalo have a great variety of malformations due to genetic causes, and TH and omphalocele are the most frequent and that several cases are still not reported, leading to an underestimation of the real weight of genetic diseases in this species.

Teleworking and Congestion: A Dynamic Bottleneck Analysis

We analyze the welfare effects of part-day teleworking on road traffic congestion in the context of Vickrey's dynamic bottleneck model. Endogenous decisions to become equipped with a teleworking-enabling technology change the scheduling of arrival times at work for equipped drivers and, due to congestion externalities, affects travel costs of all drivers. We show that even costless teleworking might be marginally welfare reducing, after reaching the optimal penetration level, as an equipped driver imposes a higher travel externality on other equipped drivers than unequipped drivers do. We study various possible market configurations for the supply of the technology, and find that private monopolistic supply of the technology might yield a higher social welfare than perfectly competitive supply.

The impact on welfare and public finances of job loss in industrial Britain

It is important to take a long view of many economic problems. This article explains how the large-scale loss of industrial jobs in parts of Britain during the 1980s and 1990s still inflates the contemporary budget deficit in the United Kingdom. Drawing on the findings of several empirical studies by the authors, the article shows that although there has been progress in regeneration the consequences of job loss in Britain’s older industrial areas have been near-permanently higher levels of worklessness, especially incapacity benefits, low pay, and a major claim on present-day public finances to pay for both in-work and out-of-work benefits. Furthermore, as the UK government implements reductions in welfare spending the poorest places are being hit hardest. In effect, communities in older industrial Britain now face punishment in the form of welfare cuts for the destruction previously wrought to their industrial base.