Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 12-2023: Value-driven Multidimensional Welfare Analysis: A Dominance Approach with Application to Comparisons of European Populations

Nikolaos Argyris (), Lars Peter Østerdal () and M. Azhar Hussain ()
Additional contact information
Nikolaos Argyris: Loughborough Business School, Postal: Loughborough University, Loughborough, LE11 3TU, United Kingdom
Lars Peter Østerdal: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
M. Azhar Hussain: University of Sharjah & Roskilde University, Postal: Department of Finance and Economics, College of Business Administration, University of Sharjah, P.O. Box 27272, Sharjah, United Arab Emirates, , Department of Social Sciences and Business, Roskilde University, Universitetsvej 1, DK-4000, Roskilde, Denmark

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.

Keywords: Multiple criteria analysis; Social welfare; Inequality aversion; Value judgements; Multidimensional stochastic dominance

JEL-codes: C44; D30; D63; D78; I31

Language: English

30 pages, November 8, 2023

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