welfare economics risk and uncertainty social decisions in risky contexts raise a number of difficult questions such as 1 should social decisions be more or less risk averse than the average person 2 should we try to avoid large catastrophes more than frequent but limited harms with similar expected impact 3 should social decisions be ambiguity averse or stick to the expected utility canon this paper reviews the welfare economics of risk and uncertainty and examines possible answers to these questions based on the pros and cons of utilitarianism ex ante egalitarianism and ex post egalitarianism

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

estimating the degree of market integration existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination this article proposes new measures of market integration defined directly in terms of a well known spatial price determination model and develops an econometric methodology for estimating these measures due to the intractability of the conditional density function of prices we use indirect inference to estimate the model parameters and market integration measures the methodology is illustrated with simulated data and is applied to soybean price data for the united states brazil and the eu copyright 2008 oxford university press

willingness to pay and the distribution of risk and wealth willingness to pay wtp most economists believe is an appropriate benefits metric for government expenditure and regulatory policies that reduce risks to human life it depends however on the distribution of risk and wealth currently society s expenditures overemphasize concentrated risks say after the fact treatment as opposed to prevention a dead anyway effect complements excess attention to intense interests in explaining this our normative criterion for spending on risk reduction is what a rational albeit uninsured individual confronting lotteries on future risks to life and wealth would choose for himself this requires correcting wtp to eliminate the dead anyway effect but continues to reflect that wealth enhances the utility of living

the aggregation of climate change damages a welfare theoretic approach the economic value of environmental goods is commonly determined using the concepts of willingness to pay wtp or willingness to accept wta however the wtp wta observed in different countries or between individuals will differ according to socio economic characteristics in particular income this notion of differentiated values for otherwise identical goods say a given reduction in mortality risk has been criticized as unethical most recently in the context of the social cost chapter of the ipcc second assessment report these critics argue that being a function of income wtp wta estimates reflect the unfairness in the current income distribution and for equity reasons uniform per unit values should therefore be applied across individuals and countries this paper analyses the role of equity in the aggregation of climate change damage estimates using basic tools of welfare economics it shows one way of how wtp wta estimates can be corrected in aggregation if the underlying income distribution is considered unfair it proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions equity weighting can significantly increase aggregate global damage figures although some specifications of weighting functions also imply reduced estimates the paper also shows that while the postulate of uniform per unit values is compatible with a wide range of reasonable utility and welfare specifications there are also cases where the common value notion is not compatible with defensible welfare concepts

can risk benefit analysis provide consistent policy evaluations of projects involving loss of life many public projects such as the construction of nuclear reactors roads and bridges involve risks to life risk benefit analysis assesses the costs and benefits of these projects by an extension of the well known willingness to pay compensating variation criterion to these situations see mishan i982 or jones lee i976 the approach taken is an ex ante one looking at people s expected utility or a substitute before deaths occur rather than a measure of actual ex post welfare losses and gains a good case can be made against these ex ante decision rules see broome i978 hammond i983 or ulph i982 but we do not consider it in this paper even in the ex ante setting however the willingness to pay measures used in risk benefit analysis may not be consistent with individual welfare these difficulties are surveyed by arrow i983 experimental evidence shows that individuals do not update their subjective probabilities in a way that is consistent with bayes theorem preference reversal willingness to pay is opposite to stated preferences occurs and choices depend on the way in which alternatives are described framing as serious as these problems are we address in this paper the question of the consistency of risk benefit tests even when individuals are rational and perfectly informed subjective and objective probabilities coincide and compensating or equivalent variations are summed across individuals to provide a social riskbenefit test we investigate the conditions under which these tests provide orderings of all the social alternatives thus avoiding inconsistent social preferences for example alternative x preferred to alternative y and y to x or x preferred to y y preferred to z and z preferred to x we require individual preferences to be consistent in the sense of hicks and allais utility depends on the probability of being alive and on consumption enjoyed while alive and consider as well the special case of the expected utility hypothesis we show that in a simple one good model section i both compensating and equivalent variations are exact indexes of individual welfare gain or loss accepting a project if and only if the sum of compensating variations is positive is equivalent in this model only to the ex ante potential pareto improvement criterion for project acceptance lemma i argues that the compensating variation or equivalent variation

valuing lives equally distributional weights for welfare analysis abstract distributional weights for welfare analysis are proposed based on two axioms 1 all lives are equally valued 2 the monetary value of a person s life is her own valuation this implies weights proportional to the reciprocals of the values of statistical lives

cointegration and market integration an application to the indonesian rice market this article suggests improvements in the use of regression analysis to measure spatial market integration the procedure pioneered by ravallion is still widespread but is valid only under certain conditions of exogeneity the alternative offered here is an error correction mechanism which makes it possible to test for exogeneity as well as indicating the direction and strength of causality in price formation between markets the method is illustrated with data on rice prices in different parts of the indonesian market the results confirm among other things that supply sources are more important than demand sources in driving prices

the digital provide information technology market performance and welfare in the south indian fisheries sector when information is limited or costly agents are unable to engage in optimal arbitrage excess price dispersion across markets can arise and goods may not be allocated efficiently in this setting information technologies may improve market performance and increase welfare between 1997 and 2001 mobile phone service was introduced throughout kerala a state in india with a large fishing industry using microlevel survey data we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion the complete elimination of waste and near perfect adherence to the law of one price both consumer and producer welfare increased

the extent pattern and degree of market integration a multivariate approach for the brazilian rice market the extent pattern and degree of integration are analyzed in a multivariate system with cointegrating restrictions the extent of the market is found by identifying locations that are linked by trade and where prices share identicall ong run information permanent component the pattern of integration characterizes interdependence and is analyzed by estimating a vector error correction model the degree of integration is calculated with persistence profiles of the long run relations we demonstrate that bivariate models are inadequate for capturing the spatial dynamics of price adjustment the methodology is applied to the brazilian rice market and policy implications are

microeconomics behavioural economics and financemichelle baddeley routledge advanced texts in economics and finance london and new york taylor and francis routledge 2013 pp xvi 305 paper isbn 978 0 415 61477 1 cloth 978 0 415 61478 8 pbk jel 2013 0029

a variance components approach to food grain market integration in northern nigeria a variance components methodology is developed for joint tests on a sample of time series of prices for seasonal differences in the price integration of markets the approach requires a statistically adequate number of observations for each market within seasons characterized by constancy of transactions costs among markets the model is applied to eighteen months of weekly grain prices for twenty two villages in northern nigeria results suggest that markets are not well integrated in the six months covering the harvest period implications are drawn for research on market performance in the region

modeling the societal impact of fatal accidents a number of proposals have been put forth regarding the proper way to model the societal impact of fatal accidents most of these proposals are based on some form of utility function asserting that the social cost or disutility of n lives lost in a single accident is a function of n a common view is that a single large accident is more serious than many small accidents producing the same number of fatalities hence 1 drawing upon a number of empirical studies we argue that there is insufficient justification for using any function of n fatalities to model societal impacts the inadequacy of such models is attributed in part to the fact that accidents are signals of future trouble the societal impact of an accident is determined to an important degree by what it signifies or portends an accident that causes little direct harm may have immense consequences if it increases the judged probability and seriousness of future accidents we propose that models based solely on functions of n be abandoned in favor of models that elaborate in detail the significant events and consequences likely to result from an accident

agriculture reform and food crisis in syria impacts on poverty and inequality abstract the paper pursues a twofold objective from a methodological viewpoint it shows how to carry out an impacts evaluation of exogenous shocks on poverty and inequality in a context characterised by out of equilibrium poorly adjusting markets as it is the case in many developing countries using a social accounting matrix framework from an empirical viewpoint it provides an assessment of how the cereal price spikes of 2007 2008 and the global recession of 2008 2009 have impacted the welfare of syrian households and how did they compound with the on going agricultural sector liberalisation implemented by the government of syria since mid 1990s this will contribute to shed some lights on the economic background behind the spreading of unrest across the country over the last couple of years or so the results show that liberalisation impacts are very different and largely affected by the adopted budget closure rules while reforms aiming at reducing agricultural market distortions such as production subsidies and price support for strategic crops could generally have a positive effect on growth poverty and inequality the elimination of food security interventions such as food stamp schemes determines an adverse distributional impact against rural household and an increase of poverty the recent macroeconomic shocks food price crisis and the global recession determined a generalised poverty increase and showed an income distribution bias against rural households three fundamental policy implications can be drawn by this study first the liberalisation of agricultural sector shows a significant growth potential and is likely to determine positive effects on poverty through a generalised increase of incomes as well as public budget savings that could be used for pursuing other policy goals second in the short run there is a structural trade off between equity improvements and poverty alleviation the policy options that will more likely reduce absolute poverty show undesirable distributive biases both on overall inequality and on rural households vis a vis urban households third the reform should include a careful design of the use of budget savings mainly to address equity goals that are likely to be generated in the short run by liberalisation

empirical investigation into spatial integration without direct trade comparative analysis before and after the establishment of the ethiopian commodity exchange this paper presents a comparative analysis of the spatial price cointegration of coffee markets in ethiopia in the pre and post ethiopian commodity exchange ecx era using the autoregressive distributed lag ardl cointegration framework the study takes into consideration a market condition in which government policy restricts arbitrage coffee trade between coffee producing areas using coffee price data from 1998 2013 and applying a bounds test approach and toda yamamoto granger causality test the study finds that the establishment of ecx has strengthened regional integration rather than a national harmony between producer markets we also find evidence that since the establishment of ecx an opportunity was created for high quality coffee to dominate price formation while also allowing lower quality coffee producing areas to establish themselves the study underlines the importance of market transparency and exchange of price information between producer markets

prioritarianism and climate change prioritarianism is the ethical view that gives greater weight to well being changes affecting individuals at lower well being levels this view is influential both in moral philosophy and in theoretical work on social choice where it is captured by a social welfare function swf summing a concave transformation of individual well being numbers however prioritarianism has largely been ignored by scholarship on climate change this article compares utilitarianism and prioritarianism as frameworks for evaluating climate policy it reviews the distinctive normative choices that are required for the prioritarian approach specifying a ratio scale for well being if the prioritarian swf takes the standard atkinson form determining the degree of concavity of the transformation function i e the degree of social inequality aversion and choosing between ex ante and ex post prioritarianism under conditions of risk the article also sketches some of salient implications of a prioritarian swf for climate policy with respect to the social cost of carbon the social discount rate optimal mitigation and the dismal theorem finally it discusses the issue of variable population

on the measurement of inequality under uncertainty abstract to take into account both ex ante and ex post inequality considerations one has to deal with inequality and uncertainty simultaneously under certainty much of the literature has focused on comonotonically linear indices functionals that are linear on cones of income profiles that agree on the social ranking of the individuals this family generalizes both the gini index and the egalitarian index minimal income however it does not include functionals such as the average of expected gini and gini of expectation in contrast the family of min of means functionals is rich enough for this purpose journal of economic literature classification numbers d31 d63 d81

how integrated is the indian wheat market abstract applying the momentum threshold autoregressive m tar model due to enders and granger enders w and granger c w j 1998 unit root tests and asymmetric adjustment with an example using the term structure of interest rates journal of business and economic statistics 16 3 pp 304 311 this article examines the relationship between the various prices of wheat quoted at different market centres in four indian states we find evidence of m tar asymmetric adjustments of wheat prices indicating that price signals within states are transmitted over time in an asymmetric manner this type of price adjusting behaviour is consistent as to how price differentials may respond to poor dissemination of knowledge regarding market conditions and high transactions costs the results offer important policy implications

the role of ex ante and ex post decisions in the valuation of life abstract this paper examines the use of ex ante and ex post criteria in the evaluation of projects involving the risk of death one issue concerns the appropriate welfare function and it is argued that this should reflect both ex post and ex ante considerations but not in the form of restrictions on the welfare function the second issue concerns the form of compensation the argument in favour of ex post compensation as a means of reducing the cost of risk bearing needs to be modified when risks involve more than a single dimension as they do in projects involving the risk of death

modeling spatial price transmission in the grain markets of ethiopia with an application of ardl approach to white teff following the agricultural market liberalization policy there is an emerging grain market structure in ethiopia in which the central wholesale market exhibits concentration of power and spatial integration with the local markets due to this it is hypothesized that the central wholesale market influences the long run price movements in the local markets the relationship can be modeled as spatial price equilibrium with the aim to guide subsequent policy decisions with regard to public intervention in the post liberalization period in this study we modeled the spatial equilibrium relationship between the producer and the wholesale prices of white teff a major staple in ethiopia using the autoregressive distributed lag modeling approach to cointegration analysis first the existence of a nonspurious long run relationship in levels between the producer prices in the local market and the wholesale prices in the central market is confirmed second the long run relationship and the error correction model for the producer price are estimated the results reveal that the wholesale price of white teff in the central consumer market is a major short and long run determinant of the producer price in the local supply markets therefore the institutional role of the government with the aim of improving producers marketing margin and the overall performance of the grain markets in the post liberalization period can be influenced through targeted interventions at the central wholesale market

the social value of mortality risk reduction vsl vs the social welfare function approach we examine how different welfarist frameworks evaluate the social value of mortality risk reduction these frameworks include classical distributively unweighted cost benefit analysis i e the value per statistical life vsl approach and various social welfare functions swfs the swfs are either utilitarian or prioritarian applied to policy choice under risk in either an ex post or ex ante manner we examine the conditions on individual utility and on the swf under which these frameworks display sensitivity to wealth and to baseline risk moreover we discuss whether these frameworks satisfy related properties that have received some attention in the literature namely equal value of risk reduction preference for risk equity and catastrophe aversion we show that the particular manner in which vsl ranks risk reduction measures is not necessarily shared by other welfarist frameworks jel d81 d61 d63 q51

on the value of life in rich and poor countries and distributional weights beyond utilitarianism this paper discusses the use ofdistributional weights in cba based on a generalbergson samuelson swf in particular it illustratessome consequences of applying a swf characterized byconstant inequality aversion which includes classicalutilitarianism as a special case together with aconstant relative risk aversion utility function whencalculating the damage costs of global warming itextends and clarifies earlier unintuitive results andemphasizes that utility must be seen as fully cardinalin terms of levels in this context in the specialcase of utilitarianism on the other hand it issufficient to be able to make interpersonalcomparisons of utility changes

transfer costs spatial arbitrage and testing for food market integration conventional tests for food market integration ask often misleadingly whether prices in different locations move together in this paper an alternative methodology the parity bounds model pbm is developed which uses information on transfer costs in addition to food prices to assess the efficiency of spatial arbitrage monte carlo experiments using data generated by a point space spatial price equilibrium model show the pbm to be statistically reliable an application to philippine rice markets demonstrates that the pbm detects efficient arbitrage when other tests do not

assessing risky social situations this paper reexamines the welfare economics of risk it singles out a class of criteria the expected equally distributed equivalent as the unique class that avoids serious drawbacks of existing approaches such criteria behave like ex post criteria when the final statistical distribution of well being is known ex ante and like ex ante criteria when risk generates no inequality the paper also provides a new result on the tension between inequality aversion and respect of individual ex ante preferences in the vein of harsanyi s aggregation theorem

catastrophe aversion and risk equity in an interdependent world catastrophe aversion and risk equity are important concepts both in risk management theory and practice keeney keeney rl 1980 equity and public risk oper res 28 3 527 534 was the first to formally define these concepts he demonstrated that the two concepts are always in conflict yet his result is based on the assumption that individual risks are independent it has therefore limited relevance for real world catastrophic events we extend keeney s result to dependent risks and derive the conditions under which more equity and more correlation between two risks imply a more catastrophic situation we then generalize some of the results for multiple correlated risks this paper was accepted by manell baucells decision analysis

attitudes toward catastrophe in light of climate change and other global threats policy commentators sometimes urge that society should be more concerned about catastrophes this paper reflects on what society s attitude toward low probability high impact events is or should be we first argue that catastrophe risk can be conceived of as a spread in the distribution of losses based on this conception we review studies from decision sciences psychology and behavioral economics that explore people s attitudes toward various social risks contray to popular belief we find more evidence against than in favor of catastrophe aversion the preference for a mean preserving contraction of the loss distribution and discuss a number of possible behavioral explanations next we turn to social choice theory and examine how various social welfare functions handle catastrophe risk we explain why catastrophe aversion may be in conflict with equity concerns and other regarding preferences finally we discuss current approaches to evaluate and regulate catastrophe risk

co2 emissions energy consumption and output in france abstract this paper examines the dynamic causal relationships between pollutant emissions energy consumption and output for france using cointegration and vector error correction modelling techniques we argue that these variables are strongly inter related and therefore their relationship must be examined using an integrated framework the results provide evidence for the existence of a fairly robust long run relationship between these variables for the period 1960 2000 the causality results support the argument that economic growth exerts a causal influence on growth of energy use and growth of pollution in the long run the results also point to a uni directional causality running from growth of energy use to output growth in the short run

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

testing for food market integration revisited this article considers the statistical performance of four commonly used econometric tests for market integration the law of one price the ravallion model cointegration and granger causality a spatial price equilibrium spe model that is subject to both production shocks and general price inflation and mimics many of the key characteristics of integrated food markets is constructed the model is used to generate food price time series of lengths that are typical of the short sample sizes available in most developing countries for both instantaneously integrated and independent markets a series of monte carlo experiments on these artificial food price time series are performed which show that all four of the conventional tests for market integration are statistically flawed

spatial market integration in the presence of threshold effects a large body of research has evaluated price linkages in spatially separate markets much recent research has applied models appropriate for nonstationary data such analyses have been criticized for their ignorance of transactions costs which may inhibit price adjustments and thus affect tests of integration this analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs we evaluate daily price linkages among four corn and four soybean markets in north carolina nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks our results confirm the presence of thresholds and indicate strong support for market integration though adjustments following shocks may take many days to be complete in every case the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment

on market integration and liberalisation method and application to ethiopia the article suggests further improvements in the methodology to analyse market integration it provides corrections to and methodological extensions of recent work in this journal it also presents a way of applying market integration techniques to the analysis of shocks such as market liberalisation and war the method is applied to the effects of liberalisation and the end of the civil war on food markets in ethiopia the conclusion is that liberalisation had important effects on the long run and short run integration of food markets