Journal of Public Economic Theory

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 1097-3923

Issue Number

No. 25-6, December 2023

Latest documents

Control and spread of contagion in networks with global effects
We study proliferation of an action in binary action network coordination games that are generalized to include global effects. This captures important aspects of proliferation of a particular action or narrative in online social networks, providing a basis to understand their impact on societal outcomes. Our model naturally captures complementarities among starting sets, network resilience, and global effects, and highlights interdependence in channels through which contagion spreads. We present new, natural, computationally tractable, and efficient algorithms to define and compute equilibrium objects that facilitate the general study of contagion in networks and prove their theoretical properties. Our algorithms are easy to implement and help to quantify relationships previously inaccessible due to computational intractability. Using these algorithms, we study the spread of contagion in scale‐free networks with 1000 players using millions of Monte Carlo simulations. Our analysis provides quantitative and qualitative insight into the design of policies to control or spread contagion in networks. The scope of application is enlarged given the many other situations across different fields that may be modeled using this framework.
Health subsidies, prevention and welfare
People value healthy ageing but may underinvest in health‐improving preventive care. This arises when they ignore the beneficial effects of healthy ageing on public health expenditures and hence on the tax burden of future generations. This health externality justifies public intervention. We build an overlapping generations model with a government subsidizing investment in health by the young generation and paying the health care costs of the old generation. We find that the welfare‐maximizing subsidy rate depends positively on the health externality and the size of health care costs, and negatively on the discount factor. The subsidy rate should therefore be high when prevention is cost‐effective and when the population is careless about the future. Moreover, the welfare‐maximizing subsidy rate is lower than the health‐maximizing rate but higher than the capital‐maximizing rate. This underlines the trade‐off for a policy maker between health and economy.
Issue Information
First‐best health policy in vaccine markets with health and network externalities
This paper considers an oligopolistic market for a vaccine, characterized by negative network effects, which stem from the free‐riding behavior of individuals engaged in a vaccination game. Vaccine markets often suffer from three imperfections: high concentration, network effects, and a health externality (contagion). The first conclusion of the paper is that the negative network externality is important as a market distortion, as it may lead to significant welfare losses. The second and main part of the paper develops a two‐part per‐unit subsidy scheme that a social planner could use to target both consumers and producers of vaccines. The scope of such a subsidy scheme to induce the firms to produce the first‐best output without network effects (which is the most ambitious first‐best target) is investigated. In many cases, while the first‐best is attainable, it requires negative prices for vaccines, which amounts to rewarding consumers to induce them to vaccinate.
Cultural and economic integration of immigrant minorities: Analytical framework and policy implications
The cultural diversity that new immigrants bring to the host economy is potentially beneficial for the productivity of both immigrants and natives, but immigrants must assimilate to some extent for these benefits to be realized. In general, immigrants assimilate more slowly than natives would like, as they ignore the external material benefits of assimilation for natives and their resistance to foreign cultural influences. We develop a formal framework that highlights the complementarity between immigrants' cultural assimilation, economic integration, and investment in human capital, indicating the scope for mutually beneficial policies, offering immigrants material incentives to assimilate more rapidly.
Risk, trust, and altruism in genetic data sharing
How does concern about genetic data privacy compare with other concerns? We conduct behavioral experiments to compare risk attitudes towards sharing genetic data with a healthcare provider with risk attitudes towards sharing financial data with a money manager. Both scenarios involve identical decisions and monetary stakes, permitting us to focus on how the framing of data sharing influences attitudes. To delve deeper into individual motivations to share data, we provide treatments that study how data sharers' altruism and trust affect their decisions. Our findings (with 162 subjects) indicate that individuals are more willing to risk a loss to privacy of genetic data (for an anticipated return framed as health benefits) than they are to risk loss of financial data (for an anticipated return in financial benefits). We also find that 50%–60% of data recipients choose to protect another person's data, with no significant differences between frames.
Vaccination under pessimistic expectations in clinical trials and immunization campaigns
We provide one of the first formalizations of a vaccination campaign in a decision‐theoretic framework. We analyze a model where an ambiguity‐averse individual must decide how much effort to invest into prevention in the context of a rampant disease. We study how ambiguity aversion affects the effort and the estimation of the vaccine efficacy in clinical trials and immunization campaigns. We find that the behaviors of individuals participating in a clinical trial differ from individuals not participating. Individuals who are more optimistic toward vaccination participate more in trials. Their behaviors and efforts are also affected. As a result, because vaccine efficacy depends on unobserved behaviors and efforts, the biological effect of the vaccine becomes difficult to evaluate. During the scale‐up phase of a vaccination campaign, provided that vaccine efficacy is established, we show that vaccine hesitancy may still be rational.
Environment, public debt, and epidemics
We study whether fiscal policies, especially public debt, can help to curb the macroeconomic and health consequences of epidemics. Our approach is based on three main features: we introduce the dynamics of epidemics in an overlapping generations model to take into account that old people are more vulnerable; people are more easily infected when pollution is high; public spending in health care and public debt can be used to tackle the effects of epidemics. We show that fiscal policies can promote convergence to a stable disease‐free steady state. When public policies are not able to permanently eradicate the epidemic, public debt, and income transfers could reduce the number of infected people and increase capital and GDP per capita. As a prerequisite, pollution intensity should not be too high. Finally, we define a household subsidy policy that eliminates income and welfare inequalities between healthy and infected individuals.
Epidemics, vaccines, and health policy
Should the police give priority to violence within criminal organizations? A personnel economics perspective
Even among themselves, criminals are not seen as trustworthy. Consequently, a criminal organization needs to incentivize its members, either by threats of violence or by rewarding good behavior. The cost of using violence depends on the resources police allocate to investigating intraorganizational violence. This means that the police may affect the choice of an incentive scheme by the criminal organization. The design of the optimal strategy for crime control has to take this into account. We develop a model of an infinitely repeated criminal labor market where (i) a criminal organization hires and incentivizes members, and (ii) peripheral crime (crime outside the criminal organization) is a stepping stone to a career in organized crime. We establish that there are two possible optimal strategies for the police. (i) There are situations in which the optimal strategy for the police is to use all of their resources to decrease the efficiency of criminals. (ii) In other situations, the optimal strategy for the police is to spend the minimum amount of resources to ensure that the criminal organization cannot punish disloyal criminals, and spend the rest of their resources to decrease the efficiency of criminals.