Questions tagged [welfare-economics]

A branch of economics that focuses on the optimal allocation of resources and goods and how this affects social welfare. Welfare economics analyzes the total good or welfare that is achieve at a current state as well as how it is distributed. This relates to the study of income distribution and how it affects the common good.

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29 views

What would be the issue if we approach inflation analysis without considering consumption bundles?

The CPI for use in calculating the rate of inflation is based off of Laspeyres' index, which is essentially the ratio of dot products of the price vector and a quantity vector. What kind of analysis ...
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How accepted is the theory that high marginal tax rates on the on corporations encourages higher labor wages/innovation?

I was watching a David Graeber and he put forward the idea that Bell Labs and high wages existed in the 50's and 60's in large part because there was a high corporate and marginal tax rate, so rather ...
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Model the uncertain impact of a proposed policy by expected utility or other probabilistic approach

The impact of a proposed policy is often uncertain and subjected to randomness. As such, it seems natural to use probabilistic models. How to model the policy impact using the expected utility ...
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How to empirically measure the underlying utility function for a 'max EU" SWF? Stated/revealed preferences over uncertain lotteries, or?

Direct answers, as well as pointers to the best literature and textbook treatments, as well as the names of key researchers, are appreciated. Suppose we are considering policies and transfers that ...
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How *should* weigh income/consumption at different income levels (esp. to the very poor vs poor) ... perhaps in a 'social welfare function'?

What is the best analysis/literature/text, that gives a theoretical justification for approaches that can be used in practice, for How we should weight income/consumption at different income levels (...
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How *do* NGOs, think tanks, and governments weigh income/consumption tradeoffs/transfers at different income levels?

In considering policies and transfers, how do we (economists, NGOs, governments & think tanks) weigh income (consumption) tradeoffs between the poor & the very poor? E.g., 'is giving 100 USD/...
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Is Hal Varian's intermediate microeconomic externality graph wrong?

Here is the capture from Hal Varian's Intermediate Microeconomics chapter Externality. I remember clearly my lecturer said this graph is wrong several years ago, but I cannot remember the argument ...
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Pigouvian tax with general utility function

Suppose person a's consumption of good $y$ imposes a negative externality on person b. Person a's utility maximisation problem is $$\max_{x_a,y_a} \ u_a(x_a,y_a),$$ subject to $$p_x x_a+p_y y_a=e_a.$$ ...
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What is the problem with this opportunity cost example?

The "stand-up economist" Yoram Bauman used the concept of opportunity cost to make the following joke: [S]omebody offers you a choice between a Snickers bar and a package of M&Ms. ...
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Why the ageing population creates problems for a country to fund old-age social protection program and what solution do we have?

Senior citizens are considered as one of the vulnerable groups and therefore, they need some social protection during their old age. However, we also face the worldwide trend of an ageing population. ...
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Rawlsian SWF and Arrow Impossibilty Theorem

given Arrow impossibility theorem the only social welfare function that satisfies unrestricted domain, pareto and the independence of irrelevant alternatives is Dictatorship. However I was wondering ...
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Why isn't high inflation along with robust welfare a 'good' system?

High inflation, by definition, means that the demand for goods and services is higher compared to the demand for currency. In other words, people are more willing to give up currency for goods and ...
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Nested/Recursive Dynastic Utility Functions

I want to find a way of representing a dynastic utility function in which not only the head of the dynasty's utility is dependent on its descendants' utility, but all members of the family tree gain ...
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Microeconomics: first fundamental theorem of welfare

Can somebody tell me why part (2) of this proof is of any relevance? (1) Assume that $x$ is Pareto-dominated by $y$. Since $x_i$ is optimal for consumer $i$: if $y_i\succ x_i$ then $p\cdot y_i > p\...
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Is $(\mathbb{R}^m)^n$ the real coordinate space of dimension $m\cdot n$?

Very simple question here: say that there are n individuals and each individual $i\leq n$ has a consumption bundle $x_i\in \mathbb{R}^m$ (i.e. there are $m$ types of goods). Suppose that social ...
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Comparing 2 equilibrium values (competitive vs centralized): can I compare only 1st derivative of objective function?

I have a rather complex model where analytical solutions do not seem achievable (I also tried symbolic solving in Matlab and Python and could not find any) so that I cannot get an explicit expression ...
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Are means-tested or universal programs more effective at reducing the poverty rate?

Advocates of means-tested programs frequently argue that they will remove inefficiences in the system by directing a larger proportion of the program's budget to people with a genuine need. By ...
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Price equilibria with transfers

I am pretty new to Microeconomics so please bear with me if I am missing something obvious. I am solving the following problem: The question is in the setting of pure exchange economy with two ...
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How do you show welfare changes with limited entry versus perfect competition?

In Perloff's intermediate microeconomics book, he explains that producer surplus will increase with policies that limit entry. I get this intuitively - if we limit competition, producers will earn ...
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109 views

Deadweight Loss Due to Taxes Represented on a Graph of the Market?

Let's say a market is operating at equilibrium, with MSB=MSC, and a tax is imposed on the market. This would shift the supply curve to the left and cause a deadweight loss represented by the triangle ...
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Theory of and studies on the long-term effect of governmental redistribution

Proposition 28 from this 2000 survey (Fuller and Geide-stevenson 2010) of American economists shows that 49% of American Economics Association members agree, and 31% agree with provisions, that it is ...
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Is there a standard term for this tradeoff when subsidizing: inducing dependence vs providing support?

I've often heard it informally argued "people will become lazy if you give them handouts". Although I doubt the economic sophistication of most such assertions, I do think they have a real point: you ...
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Identify the Pareto welfare weights

I am asked to identify the Pareto welfare weights from the FOC of the following problem $max_{{x_1}{x_2}} U_1(x_1)\ st\ u_2=U_2(x_2)\ and\ x_{1n}+x_{2n}=yn$ The Langrangian is: $L=U_1(x_1)+\lambda_1(...
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Is there any academic source that uses the following 'standard broad' definitions of externality?

According to answer to this question by KennyLJ., there exists the following definition of externality: The simple, standard, and broad definition I favor is this: A decision's effects are called ...
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Does consumer surplus over-weigh the interests of high-income consumers?

An individual's willingness to pay for a good not only depends on how much they value that good, but also on their income level (at least under the conventional non-economics definition of the word '...
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What percentage of economists recommend basic welfare like food stamps and temporary assistance for needy families?

Is it similar to minimum wage in that opinion is approximately split down party lines, seen in this 2006 survey: https://people.uwec.edu/jamelsem/fte/fte/efl/teacher_stuff/articles/economists_agree....
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Is the consumer surplus on a Giffen/Veblen good negative?

When drawing the demand and supply curves on a quantity/product space for an upwards sloping demand, assuming the two curves intersect, I noticed that the traditional consumer surplus region lies ...
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234 views

How can an outcome be Pareto efficient but not Kaldor-Hicks efficient?

An policy is a Pareto improvement if it makes some people better off and no one worse off. And a policy is a Kaldor-Hicks improvement if it can be turned into a Pareto improvement by redistributing ...
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Second welfare theorem problem

I would like to get a better understanding of part c of the following problem. It appears to me that Walrasian allocations do not change but I want to confirm whether I am right or not. Thanks. ...
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362 views

Do any social welfare functionals, other than maximin, meet all of Arrow's conditions plus invariance regarding ordinal level comparability?

In the literature on social welfare functionals, the only example I've seen of a functional which meets all of Arrow's conditions–––or at least utility analogues of Arrow's conditions–––plus ...
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280 views

What is the Walras law vs first welfare theorem

As far as I know, both of the first welfare theorem and the Walras law are closely tied to the invisible hand. what is the difference between them? thank you very much for your help
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Does the 2nd welfare theorem involve government intervention? [closed]

How is the initial redistribution of resources carried out?
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9k views

Can consumer surplus be negative if a consumer is forced to make a purchase?

Assume there is a good that a producer sells for $100$. A consumer's willingness to pay for that good is $50$. However a government program forces consumers to purchase the good irrespective of their ...
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Calculating marginal tax rates when near a cliff

When using tax and transfer microsimulation models, a common approach for calculating marginal tax rates is to recalculate the tax liability when adding $1 to earnings. This will take into account ...
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What are general equilibrium effects?

Im reading alot on public finance and have been seeing alot of mention of measuring "general equilibrium effects". I know what general equilibrium is, but i dont know what general equilibrium ...
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219 views

Does immigration help to sustain welfare in rich European countries?

There is a lot of discussions about immigration and its effect on economies lately in Europe, so I'd like to ask a question. Is it true that immigration helps to sustain welfare in rich European ...
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Excessive entry without fixed costs

Mankiw & Whinston (1986) show that the market may contain too many firms. The intuition is that if a firm charges a suboptimal high price, a rival has a demand curve that is "too high" and can ...
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93 views

Universal Basic Income [closed]

In 2017 some countries have adopted the Universal Basic Income as an alternative to Welfare Payments, my question is, is it economically feasible by governments?
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What's the term for an economic policy that has negligible effect for most, but a significant effect for a few?

I remember this came up around tariffs in the US on aluminum. They have a negligible effect on the price of an aluminum can, but aggregated across all the aluminum cans sold, it can have a significant ...
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Do I understand the second welfare theorem correctly?

As far as I understand, the second welfare theorem says that all Pareto-optimal allocations can be reached by market equilibrium on free competitive markets. Yet it seems that this understanding is ...
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Has the shrinking of the American household improved or diminished household welfare?

Over the last fifty years U.S. average household size has declined dramatically. When making within-year comparisons of household income, it is regarded as good practice to adjust for adult-equivalent ...
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Is the convexity of production sets necessary for the welfare theorems?

I have read that the convexity of production sets (for instance non-increasing returns to scale) is not a necessary assumption for the first welfare theorem but it is for the second welfare theorem. ...
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209 views

First Welfare theorem proof for local nonsatiation

I know that the First Welfare theorem holds for pure exchange economies for strict monotonicity of preferences, and logically it should also hold for local nonsatiation, but does anyone have a simple ...
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87 views

Understanding minimums in the calculation of Human Development Index

In the calculation of HDI, three indices are involved. One of them is the GNI index. In calculating this index, there's some scaling done. Quoting from the UNDP Technical notes The low minimum ...
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Microeconomic Modeling of Zero-Rated content

I'm currently writing my Bachelor Thesis which discusses the Question: Does Facebook's free Basics Programm (A website which lets people in poor countries access Internet Services without paying ...
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481 views

The role of relative prices in markets on the allocation of resources and the effect on living standards [closed]

How do the role of relative prices affect how resources are allocated? And as a result, how does this effect living standards? Would it be something along the lines of how changes of relative prices ...
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388 views

Change in Consumer Surplus with Two Price Changes: Is it Path Dependent?

The diagrams below showing demand for goods X1 and X2 are adapted from Johansson P-O (1991) An Introduction to Modern Welfare Economics (p 43). Demand for each good is assumed to be a function of its ...
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Finland's Universal Basic Income Test - how much in local terms?

Finland is currently trialling UBI at a rate of €560 (£473) per month. I'm looking for some contextualization of this figure. Is this figure supposed to cover housing costs, or are they paid from a ...
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What are the main long-standing Keynesian economic programmes in Western nations?

Much of US military spending is more easily rationalised as a job-creating programme than a form of defence, e.g. vehicles Congress funds despite Pentagon insisting it doesn't need or want them or ...
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Who originated the term "deadweight loss" and when?

I am looking for the first use of the term "deadweight loss." Any suggestions either as to who it was who first used it or how to search for it?