Social Structure, Markets and Inequality

The interaction between social structure and markets remains a central theme in the social sciences. In some instances, markets can build on and enhance social networks' economic role; in other contexts, markets appear to be in direct competition with social networks. The impact of markets on inequality and welfare is also varying: while markets can sometimes offer valuable outside options to marginalised individuals, in other situations only well connected and better off individuals can benefit from them. In this paper, our goal is to understand the economic mechanisms that can explain these different empirical patterns. We develop a simple model that combines social networks and a mix of network-exchange and market-exchange activities. The key to understanding the empirical patterns and phenomena lies in the relation between the two activities i.e., whether they are (strategic) complements or substitutes. Social connectedness facilitates the adoption of the market action if the two activities are complements; the converse is true in case of substitutes. Inequality in a social structure is typically reinforced by the market in case the two actions are complements; the converse holds true if they are substitutes

Pricing transport networks with fixed residential location

We consider a congestible static traffic network which is used by different households and analyse the conditions for optimal congestion taxes on network links, when not all links in the network can be taxed (partial network pricing). This is done under two assumptions about the toll revenues. First, lump sum transfers are assumed to be available. It is shown that social welfare maximisation leads to unequal treatment of equal households, because of differences in transport costs, and that constraints on network pricing imply complex deviations from marginal social cost pricing, because of network interactions. The second assumption is that the congestion tax revenue is redistributed to households according to predetermined shares. In that case, the optimal link taxes consist of a Pigouvian component, a Ramsey-Mirrlees component and a network interaction component. The taxes will deviate from marginal external congestion costs, even in the absence of network pricing constraints. This result is qualitatively different from the partial equilibrium analysis. Stylised examples of two networks are used to illustrate (a) the impact of unequal treatment of equals and of tax redistribution rules on optimal link taxes and on their effectiveness in terms of social welfare, and (b) the effect of network pricing constraints. The results suggest that (1) the effectiveness of congestion taxes is strongly reduced when not all links in the network can be taxed, (2) assignment inefficiencies are of less importance than excess demand levels when no taxes are present, and (3) that optimal parking charges may outperform partial pricing schemes when the assignment inefficiencies are small.congestion; road transport; pricing; networks

European Transport Policy and Cohesion - An Assessment by CGE Analysis

This paper studies the spatial impact of two main aspects of European transport policy, namely infrastructure investments and pricing. In its "White Paper: European Transport Policy for 2010: Time to Decide" the European Commission has laid down a comprehensive programme of transport policy within the EU, aiming at increasing the efficiency of the transport industry, developing the so-called trans-European infrastructure network and bringing the prices of transport services closer to the true marginal social cost. It is an important political issue whether the policy will enhance spatial cohesion in Europe or run counter the objective of a balanced economic development in the entire area of the EU. For one thing this is because spatial development objectives are themselves prominent goals among the catalogue of objectives to be attained by transport policy. Particularly infrastructure investments which are co-financed by the structural funds, are regarded a means of regional policy supporting less favoured regions. Furthermore, transport policies motivated by efficiency or environmental reasons may have undesired regional side effects, that could generate political backlash, unless one offers some compensation. The spatial impact of the two named policies is studied with the help of a spatial computable general equilibrium model, called CGEurope. It is a static model with a large number of regions covering the whole area of the EU including the new member states, plus neighbouring countries, some of them also subdivided by regions. Regions interact by trade flows. Interregional trade is costly, with trade costs depending inter alia on the state of infrastructure and on gasoline prices and infrastructure charges. Transport policies are simulated by varying the costs of transport and quantifying the impact on the welfare of households brought about by changes in goods and factor prices. We develop a series of policy scenarios and evaluate their impact an spatial equality or inequality using a whole bundle of indicators of spatial inequality. The paper documents theses scenarios, explains the modelling framework in brief, discusses the inequality indicators to be used and maps and tabulates the main results.

A social welfare model for the evaluation of the spanish income tax system

In this paper we present a social welfare model for the evaluation of the Spanish income tax system in 1986 and 1988. The redistributive effect, capturing the improvement in vertical inequality, and the revenue effect, capturing the loss in mean disposable income as a consequence of the tax, are combined to produce a measure of social welfare change. Then, following Lambert and Ramos (1996) the redistributive effect is decomposed into a horizontal and a vertical contribution. The main novelties we introduce are the following three. (a) We adopt an absolute framework which is seldom used in the empirical literature. (b) We emphasize the differences between the horizontal inequality due to the exemptions and tax credits not based on equity considerations, and what we call unintended horizontal inequality arising from: i) the practice of applying a progressive tax schedule to unadjusted incomes followed by family tax credits, rather than applying directly the tax schedule to income adjusted by family circunmstances; ii) differences between the analyst's equivalence scale and the implicit fiscal scale, and iii) the existence of other eharaeteristies, ignored by the analyst but taken as ethieally relevant by the fiscal authority. Among other things, this breakdown allows us a more detailed explanation than previous studies of the inerease in the horizontal inequality in Spain between 1986 and 1988. (c) Finally, we highlight a fundamental diffieulty in all methods, including ours, that rely on the partitíon by similars for the measurement of horizontal inequality

Second best toll and capacity optimisation in network: solution algorithm and policy implications

This paper looks at the first and second-best jointly optimal toll and road capacity investment problems from both policy and technical oriented perspectives. On the technical side, the paper investigates the applicability of the constraint cutting algorithm for solving the second-best problem under elastic demand which is formulated as a bilevel programming problem. The approach is shown to perform well despite several problems encountered by our previous work in Shepherd and Sumalee (2004). The paper then applies the algorithm to a small sized network to investigate the policy implications of the first and second-best cases. This policy analysis demonstrates that the joint first best structure is to invest in the most direct routes while reducing capacities elsewhere. Whilst unrealistic this acts as a useful benchmark. The results also show that certain second best policies can achieve a high proportion of the first best benefits while in general generating a revenue surplus. We also show that unless costs of capacity are known to be low then second best tolls will be affected and so should be analysed in conjunction with investments in the network

ILR Research in Progress 2011-12

The production of scholarly research continues to be one of the primary missions of the ILR School. During a typical academic year, ILR faculty members published or had accepted for publication over 25 books, edited volumes, and monographs, 170 articles and chapters in edited volumes, numerous book reviews. In addition, a large number of manuscripts were submitted for publication, presented at professional association meetings, or circulated in working paper form. Our faculty's research continues to find its way into the very best industrial relations, social science and statistics journals.Research_in_Progress_2011_12.pdf: 46 downloads, before Oct. 1, 2020