Welfare Economics

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Welfare Economics

• Aravinda Guntupalli

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Government welfare spending in developed and
developing countries
Nita Rudra (2002) Globalization and the decline
of the welfare states in Less-Developed
countries. Industrial organization. Vol 56(2).
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Why is it important?

• All nations are being challenged by the crucial
  task of improving income, well-being and economic
  capabilities of people.
• Every year aid is distributed, investments are
  made, policies are framed, and elaborated plans
  are hatched to achieve this goal.
• It is always complex issue that is debated by
  economists, media, politicians and layperson.

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Different topics

• May 2 General discussion on welfare
• May 9 Types of welfare states and history
• May 16 Child welfare
• May 23 Inequality and welfare
• May 30 Gender and Welfare
• Room 332 and Tuesdays 1200-1400

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Additional lectures

• June 13 (pclabor)
• We will work on SPSS and use data of World Bank
• Regression analyses
• July 4th (Discussion on special problems with
  analyses of the data)
• Office hours (Wednesday 2 to 4) Room 422

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FAQ (Frequently Asked Questions)

• Open an account in the PC labor as soon as
  possible to have access to computers for June
• The course has 4 point weight
• We will have to give both assignment and a
  presentation for 10 minutes
• Brushing up your old statistics lectures would
  help you analyze the data
• Language of the course, presentation and the exam
  is English

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Presentation and Assignment

• Presentation dates
• Saturday and Sunday (July 22 and 23 ???)
• Assignment
• Deadline for the submission is 29th July

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Various topics

• Does a GDP growth rate reduces poverty?
• How to measure Welfare?
• Welfare in Germany from 1900 onwards
• Great divergence (Asia, Ottoman Empire and
  Europe)
• Child welfare
• Employment of the women
• Fertility and welfare Is there a relation?

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Contd

• Age structure and its impact on welfare (if any)
• Missing women concept (declining sex ratio in
  some Asian countries)
• Health and welfare relation
• Gender differences in education, and health
  (special emphasis on Germany)
• Latin American inequality and its relation to
  welfare
• Democracy and welfare
• Migrants and their welfare

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www.uni-tuebingen.de/uni/wwl/meera.html

• Dont hesitate to send me an email if you have
  doubts
• aravinda-meera.guntupalli_at_uni-tuebingen.de

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How to define and measure welfare?

• Aravinda Guntupalli

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Definition of welfare

• Welfare refers to the economic well being of an
  individual, group, or economy.
• For individuals, it is conceptualized by a
  utility function.
• For groups, including countries and the world, it
  is a complex concept, since individuals fare
  differently.
• In trade theory, an improvement in welfare is
  often inferred from an increase in real national
  income.

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Contemporary measurement

• Measurement of economic development
• GNP and GDP
• Human Development Index (HDI)
• Inequality
• Lorenz curve
• Gini concentration ratio
• Poverty
• Both Absolute and relative income are important
• Measurement of poverty
• Poverty line
• Poverty head count

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Complexity of welfare measurement(Tata and
Schultz, 1988)

• Physical system
• the total value of primary industry output per
  capita and population per square kilometer of
  arable land.
• Economic system
• GDP/capita and manufacturing value-added per
  capita are two common and useful measures of
  output in economic systems
• Social system
• A social system has the role in providing in
  situations for satisfying peoples needs, safety,
  security and human development.
• As there are no direct measures for cross-country
  comparisons we have to use proxy measures like
  infant death rates, percentage of highly educated
  people, and percentage of rural population.

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Contd..

• Political system
• The role of political system is to establish
  order, justice in society and to manage human and
  physical resources efficiently.
• We can measure it using various measures like
  democracy. (freedom house or polity data)
• Psychological measurement (???)
• Happiness, good mental health and some
  psychological indicators also reflect the
  wellbeing of people
• Gender differences in Welfare (?)
• Welfare of Children(?)

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GNH measure (Bhutan)
(BBC)
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Silver wages of unskilled labourers, 1500-1849
(grams of silver per day)
Source Allen (2001), Broadberry and Gupta (2005)
Istanbul from Özmucur and Pamuk (2002
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Consumer prices in Europe, 1500-1799 (1500-49100)
Source Allen (2001), Broadberry and Gupta (2005)
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See also Broadberry and Guptas research papers
from Warwick
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Height for measuring welfare

• GDP and other statistical data are mostly
  available for country level
• Also there is paucity of information regarding
  gdp of various countries before 1960
• Economic Historians employed the finding of human
  biologists that average (not individual) human
  stature was influenced by the quality of
  nutrition, the disease environment and physical
  exertion. (see papers by Baten, Komlos and
  Steckel)

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Baten and Wagner (2002)
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Classification of economies

• 1996 World Bank income classification
• Less than 785 per capita - Low income
• 785-3115 - Lower Middle income
• 3115 to 9636 - Upper middle income
• Over 9636 - High income economies

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GNP and GDP

• The GDP is defined as the market value of all
  final goods and services produced within a
  country in a given period of time.
• Until the 1980s the term GNP or gross national
  product was used.
• The most common approach to measuring and
  understanding GDP is the expenditure method
• GDP consumption investment government
  spending (exports - imports)

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Limitations

• Poor quality statistics
• Definition - Goods and services that are sold in
  the market (unpaid work ????)
• Exchange rate problems
• To overcome this problem, common set of prices
  are used to measure output of every country (hair
  cut in India is priced the same as on in the US)
• This measure of average income is called
  Purchasing Power Parity (PPP)

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Complexity of welfare

• When we talk about welfare we need to have a full
  consideration of taxes, subsidies, transfer
  programs, health care reform, regulation,
  environmental policy, social security system, and
  educational reforms.
• Daniel Slesnick (Empirical approaches to the
  measurement of welfare, Journal of economic
  literature, 1998)

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Social indicators for the early 1990s (GDP per
capita, PPP)
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Important books

• Human development report
• World development report
• Development economics Debraj Ray
• Hunger and Public action Jean Dreze and Amartya
  Sen
• Gender Equality and Welfare States Daine
  Sainsbury
• Growing Public Social Spending and Economic
  Growth since the Eighteenth Century Peter
  Lindert
• The Gender Division of Welfare The impact of
  the British and German Welfare States Mary Daly
• Women Welfare Theory and Practice in the US and
  EuropeHirschmann and Ulrike Liebert

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Thank You