The social value of information on product quality

In the context of a seller with private information about product quality, I show that revelation of information on product quality is sometimes, but not always, socially valuable. When it is socially valuable, there is generally a tradeoff between the acquisition and revelation of finer, but more costly information and the revelation of coarser, but less costly information. As a result, it can be socially optimal for firms to reveal only coarse private information.     

Privatization, strategic foreign direct investment and host-country welfare

Recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). We show that there is a two-way causality between privatization and greenfield FDI. Privatization increases the incentive for FDI, which, in turn, increases the incentive for privatization compared to the situation of no FDI. The optimal degree of privatization depends on the cost difference of the firms, and on the foreign firm's mode of entry.     

Economists,social reformers,and prophets: a feminist critique of economic efficiency

This article examines the concept of Pareto optimality, bringing to light some of its implicit assumptions about the nature of human agency, work, and gender. It explores the androcentric character of the economic agent and the gendered nature of neoclassical models in relation to the historical development of the concept of economic efficiency during the late 1930s. The thrust toward the development of Pareto optimality as a scientific criterion of economic welfare was a response to the methodological tensions between the clearly political nature of economics and the scientific aspirations of economists. An examination of the debates from this period illuminates some of the values that became embedded in neoclassical economics, and which are now hidden by the masks of mathematics and abstraction.     

Corruption,foreign aid and welfare to the poor

This paper investigates the impact of foreign aid and corruption on the welfare of different classes in an economy that receives aid and uses it to finance a public good. We use a general equilibrium model that consists of three goods and three income classes to derive our results. The most important result we obtain is to show that under certain conditions, aid and corruption immiserize the poor.     

Decentralized trade, random utility and the evolution of social welfare

We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are affected by persistent random shocks stemming from agents’ maximization of random utility. By imposing structure on the utility noise term—logit distribution—one is able to calculate exactly the stationary distribution of the perturbed Markov process for any level of noise. We show that the stationary distribution places the largest probability on the maximizers of weighted sums of the agents’ (intrinsic) utilities, and this probability tends to 1 as noise vanishes.     

Privatization and efficiency wages

The impact of privatization is investigated in a shirking model of efficiency wages. Without trade unions, privatization — modeled as a stricter control of employees — lowers wages and raises employment, output, and profits, while effort and productivity effects depend on the employees' risk aversion. However, for a utilitarian monopoly union, facing a company characterized by a constant-elasticity labor-demand schedule, privatization raises efficiency wages. If privatization is modeled as a stronger profit orientation, wages, effort, and labor productivity will rise, while employment will shrink in a wage-setting firm. Again, wage and employment effects can be reversed in the case of wage negotiations.     

Young startup firm exports and productive efficiency

We employ the United States Census Bureau’s 2007 Survey of Business Owners to examine the relationship between the productive efficiency of startup firms and their level of exports. We find, consistent with previous work in the literature, that a small firm’s exports are positively related to their level of productive efficiency. This result holds after controlling for various individual owner, as well as firm, characteristics. Our results are also robust to the inclusion of a two-stage estimation strategy to control for the effects of endogeneity in the efficiency–exports relationship.     

Mixed oligopoly and the choice of capacity

We analyze the capacity choice of firms under different time structures in a mixed oligopoly market, in which firms decide not only production quantities but also capacity scales. We show that the public firm never chooses excess capacity, while the private firm never chooses under capacity under all possible strategic environments.     

Social cooperatives,social welfare associations and social networks

We use an original data-set to study how participation in two types of non-profit organizations – i.e. social welfare associations and social cooperatives – affects individual social capital, understood as a network of cooperative relationships. Participation in both the types of organization allows members to start new social relations. However, social welfare associations seem to play a significantly greater role in the development of volunteers’ social capital, favouring the creation of weak ties that are used to exchange information and advice, and offering the opportunity to establish stronger ties entailing concrete mutual support. Within social cooperatives, workers appear to develop their individual social capital to a greater extent than volunteers. Our results suggest that the composition of the workforce, the depth of members’ involvement in the organization’s activities and the human resources strategies adopted by the management influence the creation of cooperative relations through on-the-job interactions.     

Individual welfare,social deprivation and income taxation

Summary. In a homogeneous framework where individuals can only be distinguished on the basis of their incomes, we examine the incidence of taxation on the amount of deprivation felt in the society. We conceive deprivation in terms of utility or well-being rather than just in terms of income and we measure it by comparing the deprivation profiles arising in the different situations. We identify the restrictions to be imposed on the utility function which guarantee that a more progressive system of taxes always results in less social deprivation. We show that, in general, it is not possible to get an equivalence and realize a social improvement in terms of social deprivation by substituting a more progressive system of taxes for a less progressive one. Received: September 20, 1999; revised version: March 6, 2002 RID="*" ID="*" This paper forms part of the research programme of the TMR network Living Standards, Inequality and Taxation [Contract No. ERBFMRXCT 980248] of the European Communities whose financial support is gratefully acknowledged. Chakravarty wishes to express his sincere gratitude to the French Ministry of Education for financing his stay at DELTA during which this paper was written. The authors would like to thank Stephen Bazen, Nicolas Gravel and an anonymous referee, whose comments have helped to improve the paper, but they retain sole responsibility for remaining deficiencies. Correspondence to: P. Moyes     

Growth,mobility and social progress

We evaluate social progress on the basis of panel data on individual incomes by comparing the value of social welfare in the observed panel data to its value in a situation where individuals receive their first period income in each period. We derive necessary conditions for the welfare gain to be positive, and show how it can be decomposed in an effect of economic growth, a mobility effect and a cost due to aversion to time fluctuations given individuals’ ranks in the income distribution. The mobility effect, generated by reranking in the income distribution has two components: a cost due to time fluctuations in incomes and a benefit, due to equalization in time averaged incomes. We illustrate the analysis using CNEF data for Australia, Korea, Germany, Russia, Switzerland and the US. Our results indicate that the largest component of social progress is the equalization of time averaged income, induced by reranking. In countries with high growth (Australia, Korea and Russia), the growth effect is larger than the mobility effect, but in countries with low growth (Germany, Switzerland and the US), the opposite holds true. The poor performance of the US is explained by the large costs of income fluctuations and the way economic growth is distributed.     

Search efficiency,wage dynamics and welfare

Advances in information technology have improved the job-search process in the labor market. We analyze the effects of this improvement by constructing a search-and-matching model with two sectors: a risky sector with firm-specific productivity shocks and a risk-free sector. The risky sector is characterized by a low level of commitment between employers and workers – either party can end the employment relationship. We show that a better job-search process generates more job matches in the risky sector, and this benefits workers by improving their outside options. The effect on employers is subtle: while it is easier to fill vacancies, workers become more expensive. At the same time, the ease of finding new workers makes it harder for employers to keep their wage promises to workers and increases wage volatility. Our paper contributes to the literature by offering a novel explanation for the observed rise in wage volatility.     

Government spending, capital accumulation and the optimal policy rule: The role of public service capital

In this paper, we modify the Djajić [Djajić, S., 1987. “Government Spending and the Optimal Rates of Consumption and Capital Accumulation,” Canadian Journal of Economics 20, 544–554.] model in such a way that government consumption expenditure provides utility to households via the total stock of government services rather than the government consumption flow alone. By using such a framework, we show that the optimality condition for the public service capital stock is the marginal rate of substitution between public service capital and consumption that equals the intertemporal marginal rate of transformation between the two goods. In addition, we show that the relationship between private consumption and public service capital in a household's utility plays an important role in determining the transitional behavior of relevant variables. We also examine the second-best government consumption expenditure policy. By contrast, in the standard flow specification, e.g., Turnovsky and Brock [Turnovsky, S.J. and Brock, W.A., 1980. “Time Consistency and Optimal Government Policies in Perfect Foresight Equilibrium,” Journal of Public Economics 13, 183–212.], Ihori [Ihori, T., 1990. “Government Spending and Private Consumption,” Canadian Journal of Economics 23, 60–69.], and Turnovsky and Fisher [Turnovsky, S.J. and Fisher, W.H., 1995. “The Composition of Government Expenditure and its Consequences for Macroeconomic Performance,” Journal of Economic Dynamics and Control 19, 747–786.], the second-best government consumption expenditure is decided on the basis that the marginal utility of consumption is equal to the discounted sum of the marginal utility of the government's flow spending.     

The social value of public information with costly information acquisition

In a beauty contest framework, public authorities decide the accuracy of public information evaluating how it affects individual actions and private information acquisition. More precise public information increases welfare whenever its marginal cost does not exceed that of private information.     

Barter, credit and welfare

This paper develops a model to investigate the welfare implications of barter in Russia and other transition economies during the 1990s. We argue that barter is a welfare‐improving phenomenon that acts as a defence mechanism against monetary instability. When firms react to tighter credit markets by switching to barter, the risk they face diminishes, allowing for a higher level of production.     

The efficiency of social public expenditure in European countries: a two-stage analysis

Do European countries differ in the efficiency of their welfare policies? And which factors can account for such variability? To address these questions, we perform a two-stage efficiency analysis. First, based on a composite output indicator for social protection expenditure, we measure efficiency by means of the Free Disposable Hull and Data Envelopment Analysis techniques. Second, we perform an econometric analysis to identify the factors that can be associated to cross-country differences. We find that countries scoring higher efficiency have higher education and GDP levels, a smaller population size, a lower degree of selectivity of their welfare systems and a lower corruption level.     

Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare

Under a deadweight loss of tax and transfer, there is tension between the optimal policy choices of a Rawlsian social planner and a utilitarian social planner. However, when with a weight greater than a certain critical value the individuals’ utility functions incorporate distaste for low relative income, a utilitarian will select exactly the same income distribution as a Rawlsian.     

Asymmetric oligopoly, international trade, and welfare: a synthesis

This paper analyzes the relationship between market shares and welfare under the assumption of Cournot-oligopolistic interdependence in production. The model is general enough to deal with multiple countries, oligopolists with different levels of marginal costs within each country, and any distribution of world demand across countries. It is found that the elimination of a minor firm harms the country if the country's total production is very little. However, such a policy always benefits the country if it exports the commodity. The welfare effect of production subsidies and the case of foreign ownership of firms are also discussed.     

Privatization,foreign bank entry and bank efficiency in Croatia: a Fourier-flexible function stochastic cost frontier analysis

Using bank balance sheet data for Croatia for 1994 to 2000, this study estimates a Fourier-flexible frontier cost function. Specification tests indicate that the stochastic frontier model with a Fourier-flexible form with a truncated normal distribution of the inefficiency term allowing for time varying cost efficiency is preferred. The results show that new private and privatized banks, contrary to some expectations, are not the most efficient banks through most of the period. Privatization also does not seem to have an immediate effect on improved efficiency. However, better cost efficiency is associated with a lower likelihood of failure, suggesting that better risk management and better cost management are signs of better management in general. Finally, foreign banks have substantially better efficiency scores than all categories of domestic banks.