Public and Welfare

The increase in life expectancy is arguably the most remarkable by‐product of modern economic growth. In the last 30 years we have been gaining roughly 2.5 years of longevity every decade both in Europe and in the United States. This progress has outpaced the most optimistic scenarios and documented that demographic projections are no more reliable than economic forecasts. This book looks closely into those challenges, raising a few fundamental issues at both the macroeconomic and microeconomic levels. Among these: is it possible to turn the challenges faced by ageing and longevity into a long‐term productive opportunity? Can advanced economies engineer a healthy ageing scenario with long‐term spillovers in terms of enhanced technological progress and acceleration of long‐term growth? What is the microeconomic relationship between ageing and productivity, and how can specific policies postpone any age‐related decay in productivity at the firm and individual levels?

This book examines the HIV/AIDS epidemic in the social and economic context of poverty and economic crisis in developing and transition countries. It challenges the assumption — implicit in AIDS policy — that differences in sexual behavior are adequate to explain differences in HIV prevalence between populations. Using an epidemiological approach, the book shows how people who are malnourished, burdened with parasites and infectious diseases, and who lack access to medical care are more vulnerable to all diseases. It explains the specific mechanisms by which undernutrition, micronutrient deficiency, malaria, soil-transmitted helminths, schistosomiasis, and other parasitic illnesses increase the risk of HIV transmission and epidemic spread of HIV/AIDS in poor populations. A theme throughout the book is that the sexual transmission of HIV diverts attention from the social and economic context of profound poverty. The distraction of sex is compounded by Western stereotypes of African sexuality, perpetuated through reliance on anecdotal evidence and the construction of a notion of fundamental dissimilarity among peoples of different world regions. The book evaluates current methods in epidemiology and health economics, which do not take account of the interactions among diseases that increase risk of transmission of HIV in poor populations. It criticizes HIV-prevention policies as narrow, shortsighted, and dead-end because they fail to address the economic and social context in which risky behaviors occur. Finally, the book offers pragmatic solutions to social, economic, and biological factors that promote disease transmission, including the spread of HIV.

Important results in the applied welfare literature are used to extend a conventional Harberger cost-benefit analysis. A conventional welfare equation is obtained for marginal policy changes in a general equilibrium economy with tax distortions. It is extended to accommodate internationally traded goods, time, income taxes, and non-tax distortions, including externalities, non-competitive behaviour, public goods, and price-quantity controls. The welfare analysis is developed in stages, and where possible is explained using diagrams, to make it more amenable to the different institutional arrangements encountered in applied work. Computable welfare expressions are solved using demand-supply elasticities. In a conventional cost-benefit analysis, lump sum transfers are used to separate the welfare effects of individual policy variables. This is important because it allows policy evaluation to be divided across specialist agencies. These transfers are carefully examined to identify the important role played by the marginal social cost of public funds (MCF) in policy evaluation when governments balance their budgets with distorting taxes. This book separates income effects for marginal policy changes in the shadow value of government revenue. As a scaling coefficient that converts efficiency effects into dollar changes in private surplus, it makes income effects irrelevant in single (aggregated) consumer economies, and conveniently isolates distributional effects in heterogeneous consumer economies. This decomposition is used to test for Pareto improvements, and to examine the separate, but related roles of the shadow value of government revenue and the MCF in applied work.

In spite of recurrent criticism and an impressive production of alternative indicators by scholars and NGOs, GDP remains the central indicator of countries’ success. This book revisits the foundations of indicators of social welfare, and critically examines the four main alternatives to GDP that have been proposed: composite indicators, subjective well-being indexes, capabilities (the underlying philosophy of the Human Development Index), and equivalent incomes. Its provocative thesis is that the problem with GDP is not that it uses a monetary metric but that it focuses on a narrow set of aspects of individual lives. It is actually possible to build an alternative, more comprehensive, monetary indicator that takes income as its first benchmark and adds or subtracts corrections that represent the benefit or cost of non-market aspects of individual lives. Such a measure can respect the values and preferences of the people and give as much weight as they do to the non-market dimensions. A further provocative idea is that, in contrast, most of the currently available alternative indicators, including subjective well-being indexes, are not as respectful of people’s values because, like GDP, they are too narrow and give specific weights to the various dimensions of life in a more uniform way, without taking account of the diversity of views on life in the population. The popular attraction that such alternative indicators derive from being non-monetary is therefore based on equivocation. Moreover, it is argued in this book that “greening” GDP and relative indicators is not the proper way to incorporate sustainability concerns. Sustainability involves predicting possible future paths, therefore different indicators than those assessing the current situation. While various indicators have been popular (adjusted net savings, ecological footprint), none of them involves the necessary forecasting effort that a proper evaluation of possible futures requires.

When taxes are introduced on carbon and energy, and the revenue is used to reduce other taxes, will a positive effect be achieved both for the environment and for the economy? In 1990, Finland was the first country that introduced a tax on CO₂. Later, Sweden, Denmark, Netherlands, Slovenia, Germany, and the UK followed suit with tax reforms that shifted taxation from labour to carbon and energy. Over the years, CO₂ and energy taxes have gradually been raised, so that in Europe taxes of more than 25 billion EUR a year have been shifted. In this book, these experiences with carbon‐energy taxation, along with tax‐shifting programmes lowering other taxes, are examined in detail. Availability of unique and original data, including sector‐specific energy prices and taxes, as well as the use of advanced statistical techniques, such as co‐integration analysis and panel‐regression techniques along with the time‐series‐estimated macro‐economic model – Energy–Environment–Economy model for Europe (E3ME), makes this analysis truly comprehensive. Results of the analysis show that even though the taxes implemented have been relatively modest, they have, in the countries examined, contributed to a reduction in the emissions of greenhouse gases of up to 7 per cent, while for five of the countries a small increase in economic activity is recorded as a result of the tax‐shifting, with other impacts separated out. Due to concerns for competitiveness, the largest industrial emitters of greenhouse gases within Europe continue to benefit from exemptions from the carbon‐energy taxation schemes, as outside Europe there are major emitters without any economic penalties attached to greenhouse gas emissions. On basis of the lessons from carbon‐energy taxation learned in Europe, the editors of the book indicate how carbon‐energy taxation could usefully be combined with emissions trading, and they discuss how the recommendations from IPCC for a gradually escalating carbon price could be accomplished while preventing carbon leakage.

This book mounts a critique of current health economics and provides a new way of looking at the economics of health and health care. It argues that health economics has been too dominated by the economics of health care and has largely ignored the impact of poverty, inequality, poor housing, and lack of education on health. It is suggested that some of the structural issues of economies, particularly the individualism of neo liberalism which is becoming more and more pervasive across the globe, need to be addressed in health economics. The book instead proposes a form of collective decision making through communitarianism, placing value on participation in public life and on institutions, such as health care. It is envisaged this form of decision making can be used at the local, national, or global levels. For the last, this would mean a major revamp of global institutions like the World Bank and the IMF. Examples of the impact of the new paradigm on health policy in general but also more specifically on priority setting and equity are included.

The book takes stock and looks ahead on the development and implementation of competition policy in the European Union (EU) fifty years after the Treaty of Rome. Competition policy has emerged as a key policy in the EU, since today there is consensus that competition is the driving force for economic efficiency and the welfare of citizens. In this period, merger control has been introduced (in 1989) and reformed (in 2004); case law has established Articles 81 and 82 as fundamental tools to control and prevent anti-competitive behavior; state aid control has consolidated and evolved towards a more economic approach; and the authority of the EC and the judicial review of the Court of First Instance (CFI) and the European Court of Justice (ECJ) are firmly established. The book provides an account of the more economic approach to competition policy and reflects the main areas of interest, learning, open issues, and progress in the area: the design of competition policy institutions; the evolution of the implementation of competition policy and its convergence or divergence with US practice; restrictive practices, cartels, abuse of dominance, merger control, state aids, the interaction of competition policy, and regulation; and studies its application to telecoms, banking, and energy sectors. All the chapters are covered by top specialists combining theoretical with practical knowledge and discussing the economic underpinnings of the application of the law and the main cases.

The concepts of cultural diversity and cultural identity are at the forefront of the political debate in many western societies. In Europe, the discussion is stimulated by the political pressures associated with immigration flows, which are increasing in many European countries. The imperatives that current immigration trends impose on European democracies bring to light a number of issues that need to be addressed. What are the patterns and dynamics of cultural integration? How do they differ across immigrants of different ethnic groups and religious faiths? How do they differ across host societies? What are the implications and consequences for market outcomes and public policy? Which kind of institutional contexts are more or less likely to accommodate the cultural integration of immigrants? All these questions are crucial for policy makers and await answers. This book aims to provide a stepping stone to the debate. Taking an economic perspective, this edited book presents a current, comparative picture of the process of cultural integration of immigrants across Europe. It documents the main economic debates on the causes and consequences of cultural integration of immigrants, and provides detailed descriptions of the cultural and economic integration process in seven main European countries, including France, Germany, Italy, Spain, Sweden, Switzerland, and the United Kingdom. It also compares the European context with the integration of immigrants in the United States.

This book challenges the conventional wisdom that greater schooling and skill improvement leads to higher wages, that income inequality falls with wider access to schooling, and that the Information Technology revolution will re-ignite worker pay. Indeed, the econometric results provide no evidence that the growth of skills or educational attainment has any statistically significant relation to earnings growth or that greater equality in schooling has led to a decline in income inequality. Results also indicate that computer investment is negatively related to earnings gains and positively associated with changes in both income inequality and the dispersion of worker skills. The findings reports here have direct relevance to ongoing policy debates on educational reform in the United States.

Why is there child labour? Are there arguments for abolishing or curtailing all forms of child labour, or just morally and physically dangerous ones like soldiering and prostitution? Given that at least some forms of child labour ought to be abolished or curtailed, which is the most effective way of doing it? The book tries to answer these questions both theoretically and empirically. Child labour can be inefficiently high or inefficiently low, but more likely the former. Market and government failure can lead to children being effectively sold into slavery. Even the most common and least objectionable forms of child work, helping parents on the family farm or with domestic chores, have harmful effects. The mechanisms that produce excessive child labour are the same that produce excessive fertility and infant mortality. There is no single remedy for child labour. A ban is unlikely to be effective on its own. The list of effective instruments includes not only obvious candidates like schools, credit, and cover against certain risks, but also less obvious ones like sanitation and preventive medicine. Even humdrum policies such as bringing electricity and piped water into people’s homes can significantly reduce child labour.