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Value-driven Multidimensional Welfare Analysis: A Dominance Approach with Application to Comparisons of European Populations

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Abstract

We introduce a framework for social welfare evaluation that accommodates multiple dimensions of individual welfare, permits incorporating value judgements and enables robust social welfare comparisons. Our framework follows a dominance-based paradigm and utilises non-decreasing and potentially concave multi-attribute functions to model individual welfare. We describe how this permits capturing a variety of trade-offs between welfare attributes as well as incorporating concerns about distributional inequality in social welfare evaluation. We derive theoretical results which enable the practical implementation of our approach. Our framework incorporates a welfare measurement scale. This facilitates a richer form of analysis, compared to other dominance-based methods, from which we can gauge the overall level of social welfare in different populations relative to some meaningful benchmarks, as opposed to deriving only partial rankings. We illustrate the application of our framework with a case study investigating social welfare across 31 European countries based on the EU-SILC dataset.

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  • Argyris, Nikolaos & Østerdal, Lars Peter & Hussain, M. Azhar, 2023. "Value-driven Multidimensional Welfare Analysis: A Dominance Approach with Application to Comparisons of European Populations," Working Papers 12-2023, Copenhagen Business School, Department of Economics.
  • Handle: RePEc:hhs:cbsnow:2023_012
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    More about this item

    Keywords

    Multiple criteria analysis; Social welfare; Inequality aversion; Value judgements; Multidimensional stochastic dominance;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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