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

Nikolaos Argyris*, Lars Peter Østerdal, M. Azhar Hussain

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We consider the problem of comparing multidimensional probability distributions and its use in comparing the social welfare of different populations. We introduce theoretical results on two multidimensional stochastic orders, termed multidimensional first- and second-order dominance, that characterise the dominance relations and permit the practical comparison of discrete multidimensional probability distributions. Our results form the basis for a new framework for social welfare evaluation, which accommodates multiple dimensions of individual welfare, permits incorporating value judgements and enables robust social welfare comparisons. Our framework utilises non-decreasing and potentially concave multi-attribute functions to model individual welfare. We describe how this enables capturing a variety of trade-offs between welfare attributes as well as incorporating concerns about inequality in social welfare evaluation. Our framework also 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.
Original languageEnglish
JournalEuropean Journal of Operational Research
Number of pages29
ISSN0377-2217
DOIs
Publication statusPublished - 21 Dec 2024

Bibliographical note

Epub ahead of print. Published online: 21 December 2024.

Keywords

  • Multiple criteria analysis
  • Social welfare
  • Inequality aversion
  • Value judgements
  • Multidimensional stochastic dominance

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