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STOCHASTIC DOMINANCE AND DEMOGRAPHIC POLICY EVALUATION: A CRITIQUE

Published online by Cambridge University Press:  29 February 2016

Juan Carlos Cordoba  and
Xiying Liu
Juan Carlos Cordoba
Affiliation:
Iowa State University, USA Email: cordoba@iastate.edu
Xiying Liu
Affiliation:
Economics and Management School of Wuhan University, China Email: xiyingliu@whu.edu.cn
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Abstract:

Stochastic dominance (SD) is commonly used to rank income distributions and assess social policies. The literature argues that SD is a robust criterion for policy evaluation because it requires minimal knowledge of the social welfare function. We argue that, on the contrary, SD is not a robust criterion. We do this by carefully introducing microfoundations into a model by Chu and Koo (1990) who use SD to provide support to family-planning programs aiming at reducing the fertility of the poor. We show that fertility restrictions are generally detrimental for both individual and social welfare in spite of the fact that SD holds. Our findings are an application of the Lucas’ Critique.

Keywords

fertilitychildrenwelfaredemographic policiesone child policyincome distributionstochastic dominanceD31D63I32J13
Type
Research Papers
Information
Journal of Demographic Economics , Volume 82 , Issue 1 , March 2016 , pp. 111 - 138
Copyright
Copyright © Université catholique de Louvain 2016 

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