One of the challenges of population aging is the rising demand of elder care. Adult children fill a substantial portion of this care need. To understand its implication on their labor market choices and welfare outcomes, we build a simple static model where households can spend time and money producing care. We calibrate the model using data from the American Community Survey, the Health and Retirement Study, and National Health and Aging Trends Study/National Study of Caregiving to match moments in the labor market and caregiving patterns. With the calibrated model, we consider a few government programs under a projected aging population structure. Our results show that care subsidy and Medicaid expansion both cause a shift from informal care to formal care, relieving adult children from care burdens and thus improving their welfare. Caregiver allowance appears to have little effects on caregiving behaviors, which leads to minimal welfare improvement.

This paper investigates the long-run effects of immigration on wages and welfare in a model with endogenous technology choice (ETC) where firms are allowed to choose their optimal skill intensity from a menu of available technologies. I embed the ETC framework into the Auerbach and Kotlikoff model (1987) that features a large set of overlapping generations, a rich collection of population dynamics, and a social security system. I calibrate the model to match with the U.S. data and evaluate the effect of ETC with the help of two experiments. In the first experiment, I increase the share of high-skilled immigrants and compare the wage and welfare predictions of the model with ETC to a standard model where the skill intensities in production technology are fixed. In the standard model, since the skill intensities are constant, increase in the supply of high-skilled labor leads to a decrease in high-skilled wages and an increase in low-skilled wages. On the other hand, in the model with ETC, negative supply-side effects are counterbalanced by an increase in the intensity of the more abundant high-skilled labor, leading to a smaller decrease in their wages. The discrepancy between wage predictions of these two models is also reflected in the welfare: while the model with ETC predicts an increase in both high- and low-skilled natives’ welfare, the standard model would predict a decrease in the welfare of the high skilled and a larger increase in the welfare of the low skilled. In the second experiment, I examine the effects of an increase in low-skilled immigration and find that in this case, since the initial production technology is low-skilled intensive, the ETC effects are smaller. These results imply that if ETC is ignored, both in the short run and long run, wage and welfare analyses of immigration will be incomplete, and even misleading.

Gollier proposed in 2008 a model for the analysis of pension schemes that is helpful to focus attention on the impact of intergenerational risk sharing and on the role of the participation constraint. He uses the model to analyze the relative attractiveness of a collective scheme with respect to schemes that may be implemented by individuals for themselves. The analysis makes use of an assumption concerning the ownership rights of investment returns realized by generations that are between career start and retirement at the time of the transition from an individual to a collective system. The present paper investigates the consequences of adopting an alternative assumption. In a calibration exercise, the increase of the effective rate of return obtained by switching from an existing ‘autarky’ scheme to an infinite-horizon ‘collective’ scheme is found to be 8 basis points, as opposed to 72 basis points as reported by Gollier. Additionally, the effects are considered of changes in the specification of agents' preferences, aiming to express the specific nature of retirement income provision in the second pillar. The Black–Scholes assumptions are used to model the economic environment, so that many results can be obtained in closed form.

This paper examines how strengthening patent protection affects welfare in a nonscale quality-ladder model, which was developed by Segerstrom [American Economic Review 88, 1290–1310] and generalized by Li [American Economic Review 93, 1009–1017]. In the Segerstrom–Li model, patent protection creates no distortion in static allocation among the production sectors. In order to examine the welfare effects of strengthening patent protection adequately, we incorporate a competitive outside good into the Segerstrom–Li model. In the general model, we derive the welfare-maximizing degree of patent protection analytically by utilizing a linear approximation of the transition path. The result shows that the welfare-maximizing degree of patent protection is weaker when the market share of the outside good is positive than when it is zero. In other words, disregarding the static distortion that patent protection creates leads to excessive patent protection.

This paper demonstrates how corner solutions raise difficulties for the specification, estimation, and use of incomplete demand systems for welfare measurement with disaggregate consumption data, as is common in the outdoor recreation literature. A simple analytical model of consumer behavior is used to elucidate the potential biases for welfare measurement arising from modeling the demand for M goods as a function of M + N prices (N > 1) and income when individuals do not consume all goods in strictly positive quantities. Results from a Monte Carlo experiment suggest that these biases can be substantial for large-scale policy shocks when prices are highly correlated.

The purpose of the study was to ascertain the competitive and complementary potential of fresh vegetable production relative to traditional row crop production using a regional partial equilibrium model. It seems clear from the analysis that vegetable crops are not destined in the near future to replace row crops in terms of land utilization. Nevertheless, vegetable crops appear to compete with and complement row crops well as evidenced by substantial increases in production as market share was assumed to increase. However, fresh vegetables cannot be considered as residual enterprises to which producers move when the demand for row crops declines. Even with a simulated 20 percent decrease in the demand for row crops, the acreage of fresh vegetables did not increase.

Traditionally, collective defined benefit pension schemes have played an important role in the provision of pensions. Various trends such as population ageing put these schemes under serious pressure, however. Whether this is good or bad depends among other things on two factors: one is the value of the risk sharing between generations that is organized by pension schemes, and another is the cost of the distortions of labour supply decisions that these collective schemes imply. This paper constructs a model with overlapping generations of households and a pension scheme to assess the role of these two factors. The paper finds that the welfare gain from intergenerational risk sharing generally dominates the cost of labour supply distortions.

An interregional reactive programming model of the United States dairy industry is used to test the welfare implications of several dairy program changes on milk producers, milk consumers, and taxpayers. The results showed that each of the tested alternatives (price support reduction, price support reduction with frozen minimum Class I price, assessments, and production quotas) could reduce price support expenditures substantially. However, assessments reduced expenditures most effectively in terms of cost to milk producers for the United States generally while price support reduction with frozen minimum Class I price was most efficacious in terms of cost to Southeast producers.

The U.S. crop subsidies provide incentives for farmers to expand feedstock production, which benefits the biofuel producers by lowering input costs. This study develops a general equilibrium model to analyze the effects of a reduction in the U.S. crop subsidy on biofuel industries and social welfare. The impacts of feedstock policies on the biofuel market are marginal. In contrast, the biofuel mandate has a larger impact and counteracts the effects of the crop subsidy reduction. The mandate increases the demand for feedstock and causes not only grain ethanol, but also cellulosic ethanol production to rise. The mandate exacerbates the distortion, and government spending increases significantly, leading to greater welfare loss.

Policy analysis is complicated by the myriad of benefits and costs generatedby the use of natural resources. This study develops three benefits thatmust be considered in the granting of a consumptive use permit for waterfiled by Adena Springs Ranch, east of Ocala, Florida. This ranch is hopingto expand into grass-fat beef; but to do so, it needs additional water forirrigation. Specifically, our analysis considers the potential gain from theranch, the potential negative effect on existing permit holders andenvironmental uses of water, and the possible positive value generated bythe increased surface flow for other recreational users in eastern MarionCounty.

This paper evaluates the welfare gains arising from deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices, and home bias in production. The model is estimated and not rejected by the data. Two main results emerge: (i) an increase in vertical trade (occuring at the early stage of the production process) implies welfare gains whereas (ii) an increase in horizontal trade (occuring at the late stage of the production process) implies welfare losses.

In this paper, we investigate incentives, other than altruism, that developed countries have for improving developing country technologies. We propose a simple model of international trade between two regions, in which individuals have preferences over an inferior good and a luxury good. The poor region has a comparative advantage in the production of the inferior good. Even when costly adaptation of the technology to the poor region's characteristics is required—making the technology inappropriate for local use—there are parameter configurations for which the rich region has an incentive to incur this cost. It benefits from a terms-of-trade improvement and from greater specialization in the luxury good. Indeed, there are cases where the rich region would prefer to improve the poor region's technology for producing the inferior good rather than its own. We apply our model to the Green Revolution and provide a quantitative assessment of its welfare effects.

An examination of the economic impacts of reduced milk production associated with Johne's disease on Johne's-positive and Johne's-negative dairy operations indicated that, if Johne's disease had not existed in US dairy cows in 1996, then the economic surplus of Johne's-negative operations would have been $600 million±$530 million lower, while the economic surplus of Johne's-positive operations would have been higher by $28 million±$79 million, which was not significantly different from zero. The data available for projecting changes in surplus were not sufficiently precise to allow an exact statement on whether Johne's-positive operations would have been better or worse off economically, in terms of the value received for producing more milk if they had not been affected by Johne's disease. The changes in producer surplus, based upon eliminating specific epidemiological risk factors for Johne's disease, were disaggregated between Johne's-positive dairy operations exposed to the risk factor and all other US dairy operations. Eliminating the risk factor of having any cows not born on the operation would have had a significant positive effect on the economic surplus of Johne's-positive operations that had any cows not born on the operation.

The goal of this study was to measure the economic impacts of reduced milk production associated with papillomatous digital dermatitis (PDD) in dairy cows in the USA, and of specific risk factors for PDD, in 1996. The method applied was an economic-welfare analysis of producer and consumer surplus, with the GUM Workbench used to analyse uncertainties in the measurements. Reduced milk production associated with PDD was found to reduce consumer surplus by $750 million±$580 million, and to increase the economic surplus of producers by $560 million±$470 million, with a net economic loss of $190 million±$130 million. An examination of the economic effects of specific epidemiologic risk factors for PDD showed that having dairy cows that were not born on the operation had important economic consequences associated with the disease, as did the type of land to which dairy cows had access during the winter months and the type of flooring on which cows walked. Washing hoof-trimming equipment between cows was an important biosecurity measure that was associated with reduced PDD. The epidemiologic model used also implicated hoof trimmers who trimmed cattle hooves on other operations as having an important economic impact associated with this disease, although this finding may have been erroneous.

An examination of the economic effects of epidemiologic risk factors for Johne's disease identified regional and herd size differences as having the greatest impact. Having dairy cows that were not born on the operation was the most important factor over which individual producers had the most immediate control. Economic consequences associated with using multiple-cow-maternity housing and multiple-preweaned-calf housing were not statistically significant. Economic welfare analysis was applied, and the GUM Workbench was used to analyse uncertainties in the estimates of the economic impacts.

Accurately assessing the economic impacts of diseases and other factors that affect milk production requires that the demand for milk be taken into account. Because demand for milk in the USA is relatively inelastic (i.e., consumers generally purchase a somewhat fixed amount over a given time frame, regardless of fluctuations in price), consumers tend to reap much of the benefit of enhanced production. An examination of the economic impacts of Johne's disease indicated that reduced milk production, associated with the determination of dairy operations as Johne's-positive, reduced consumer surplus by $770 million ± $690 million, and resulted in a total loss of $200 million ± $160 million to the US economy in 1996. Most of the economic surplus lost by consumers was transferred to producers, whose economic surplus increased by $570 million ± $550 million as a result of the reduced milk production associated with Johne's disease. Uncertainty analysis showed that the estimated reduction in milk production on Johne's-positive dairy operations accounted for most of the uncertainty in the economic-impact estimates. If Johne's disease had not been present on US dairy operations, then an additional 580 million ±460 million kg of milk would have been produced, but the price would have fallen by 1·1±1·0 cents/kg, and the total value of the milk would have decreased by $580 million ± $560 million.

In recent decades, the structure of wages in the U.S. economy has shifted to favor workers with college degrees over those without college degrees. Concurrently, there has been an increase in the share of the workforce that is college educated. We build an overlapping generations model in which skill-biased technological change drives both rising wage inequality and a rising percentage of skilled (educated) workers in the labor force. We explore the implications for agent welfare and for the distribution of income of different factor taxation choices. We find that higher tax rates on capital and lower tax rates on unskilled labor can yield steady-state welfare gains across a heterogeneous population, and that these gains increase as the economy experiences technological change that favors skilled labor. Moreover, these shifts in taxation can lower net wage inequality. Steady-state welfare gains, however, come at the expense of agents alive upon implementation.