Externalities Research Articles

External Transport Costs and Implications for Sustainable Transport Policy

External Transport Costs and Implications for Sustainable Transport Policy

Valuing Sustainability Impacts and Food Security Effects of Local Mariculture

Global events such as the COVID-19 pandemic and regional events like the wars in Ukraine and in Gaza have affected and still affect global supply chains, including those for food. This has increased awareness of the importance of local food production, including aquaculture and mariculture. In this study, we point out and calculate the economic values of environmental sustainability and food security inherent in local production versus import alternatives. We present a case study involving the environmental effects and food security of supplying sea fish to the Israeli market from local production versus imports. The results show that increasing the consumption of seabream in Israel from imports, rather than local production, causes substantial external costs by increasing environmental damage due to increased transport and increasing potential food insecurity. Decision-makers should take these costs into account when deciding on a policy to support local aquaculture.

External environmental costs of electricity generation using a life cycle approach: a case study of Spain

External environmental costs of electricity generation using a life cycle approach: a case study of Spain

The service trade with AI and energy efficiency: Multiplier effect of the digital economy in a green city by using quantum computation based on QUBO modeling

This research examines the energy efficiency of city districts through the Malmquist–DEA model and investigates the spatial effects of the service trade and the digital economy on energy efficiency in urban green development. The study also delves into the specific context of the AI service trade to gain insights into and align with the emerging digital intelligence industry. The interplay of the service trade with the digital economy, alongside the AI service trade with innovation, significantly enhances urban energy efficiency and demonstrates positive externalities. Building on the empirical findings, this research employs cluster analysis to explore the green development of city districts and uses AI technology to program green communication and cooperation mechanisms across district clusters, employing quantum computation based on QUBO modeling. This study contributes to a deeper understanding of the cofunction of the service trade and the digital economy in terms of energy efficiency and aids in developing new quality productivities for green cities through quantum-based AI advancements. This research has clear implications for cutting-edge interdisciplinary applications of green AI technologies in social computing science.

Damocles's Switchboard: Information Externalities and the Autocratic Logic of Internet Control

Abstract This paper advances a theory for the autocratic logic of internet control. Politically motivated internet control generates a positive externality for domestic data-intensive firms and a negative externality for domestic knowledge-intensive research entities. Exploiting a major internet control shock in 2014, I find that Chinese data-intensive firms gained 26 percent in revenue over other Chinese firms as the result of internet control. The same shock incurred a 10 percent decline in research quality from Chinese researchers, conditional on the knowledge intensity of their discipline. It also reduced the research quality from Chinese researchers relative to their US counterparts by 22 percent in all disciplines. Due to the positive data externality, internet control enacted to prevent domestic threats challenges the state's competing need for data sovereignty against foreign threats. Meanwhile, the state shields certain foreign knowledge-intensive actors from the negative knowledge externality to avoid the immediate economic costs they might otherwise impose. Qualitative evidence supports both implications, highlighting the centrality of short-term interests and foreign actors in autocratic decision making.

Recycling packaging waste from residual waste reduces greenhouse gas emissions

Recycling packaging waste from residual waste can help alleviate resource pressure. However, its environmental and economic benefits remain uncertain, which hinders the widespread application of packaging waste recycling. This study assessed the greenhouse gas (GHG) emissions, environmental impacts, and external costs of a government-recommended technology for recycling packaging waste by applying Life Cycle Assessment (LCA) and ChintaxRCP model. The results showed that packaging waste recycling reduced GHG emissions by an average of 348.1 kg CO2-eq/t residual waste, and external costs by 376.7 €/t residual waste, due to the decrease in incineration. If all packaging waste in residual waste is recycled, over 60% of the total GHG emissions and about 80% of the external costs of residual waste management can be avoided. Moreover, sensitivity analysis indicated that the content of paper and plastic had a significant impact on the environmental impacts of residual waste management. This study demonstrates that recycling packaging waste instead of incineration can bring environmental and economic benefits in the long run. The study provides quantitative evidence to support policies for waste management and increases confidence in the utilization of low-value recyclables for the government.

A study on differences in economic and social structure between education and food production

Education and food are vital commodities, yet their economic and social structures differ greatly. Food production requires private enterprise to maintain financial efficiency, while education relies on the government to maximize social efficiency. This paper examines the rationale behind disparities in the distribution of education and food production sectors through the lens of economic efficiency, accessibility and informed public decision-making. Education has positive externalities, promoting social cohesion by teaching shared values, stabilizing the functioning of society and achieving social and educational equity through the participation of an educated population in democratic processes. Private food production can maintain the ability to minimize costs and maximize product quality through market competition. In addition, private companies are better equipped to take on the significant risks associated with agribusiness. Competition and technological innovation in the food industry have made prices accessible, ensuring that essential nutrients are affordable to low-income and vulnerable groups. Public education can also have a positive impact on food production. Public education promotes the long-term development of the food industry by training relevant agricultural talents to carry out technological innovations related to food production. In addition, educated citizens are more likely to be concerned about food safety and its production process—the demand for food transparency and quality forces food producers to adhere to higher standards and innovate. Thus, rationalizing distribution and interaction between the education and food production sectors results in optimal social outcomes.

Posting to impress? Organizational impression management tactics multinational firms employ to showcase innovations supporting SDGs

Multinational enterprises (MNEs) play a significant role in promoting innovation and implementing Sustainable Development Goals (SDGs). MNEs have embraced social media use not only to promote themselves, but also to engage with various stakeholders. Using mixed methods such as Python programming scripts, big data analysis, text analysis and coding, this study explores Facebook (FB) communications specific to innovation and SDGs (ISDG). The study's findings suggest that only approximately 2.7% of the overall communications are about ISDGs. The frequency of ISDG communications varies by industry category and region, but public engagement only varies by industry. Additionally, the study found that MNEs predominantly use assertive organizational impression management (OIM) tactics in their ISDG communications. Our analysis also suggests that ISDG communications tend to focus on SDGs that impact positive externalities rather than negative ones. Overall, our findings indicate that slowly but surely most MNES are laying down the foundation for possibly adopting innovations related to the implementation of SDGs.

Building cybersecurity resilience: integrating defense and recovery investment strategies in an expected resilience framework

PurposeTo remain competitive in an unpredictable environment where the complexity and frequency of cybercrime are rapidly increasing, a cyber resiliency strategy is vital for business continuity. However, one of the barriers to improving cyber resilience is that security defense and accident recovery do not combine efficaciously, as embodied by emphasizing cyber security defense strategies, leaving firms ill-prepared to respond to attacks. The present study thus develops an expected resilience framework to assess cyber resilience, analyze cyber security defense and recovery investment strategies and balance security investment allocation strategies.Design/methodology/approachBased on the expected utility theory, this paper presents an expected resilience framework, including an expected investment resilience model and an expected profit resilience model that directly addresses the optimal joint investment decisions between defense and recovery. The effects of linear and nonlinear recovery functions, risk interdependence and cyber insurance on defense and recovery investment are also analyzed.FindingsAccording to the findings, increasing the defense investment coefficient reduces defense and recovery investment while increasing the expected resilience. The nonlinear recovery function requires a smaller defense investment and overall security investment than the linear one, reflecting the former’s advantages in lowering cybersecurity costs. Moreover, risk interdependence has positive externalities for boosting defense and recovery investment, meaning that the expected profit resilience model can reduce free-riding behavior in security investments. Insurance creates moral hazard for firms by lowering defensive investment, yet after purchasing insurance, expanded coverage and cost-effectiveness incentivize firms to increase defense and recovery spending, respectively.Originality/valueThe paper is innovative in its methodology as it offers an expected cyber resilience framework for integrating defense and recovery investment and their effects on security investment allocation, which is crucial for building cybersecurity resilience but receives little attention in cybersecurity economics. It also provides theoretical advances for cyber resilience assessment and optimum investment allocation in other fields, such as cyber-physical systems, power and water infrastructure – moving from a resilience triangle metric to an expected utility theory-based method.

The Clash of the Policies: The Joint Effect of EU Cohesion Policy and Common Agricultural Policy on the Public Support for European Integration

AbstractA vital element of the European Union (EU) political system is the idea of further European integration. Whilst most existing works investigate the effects of the Cohesion Policy (CP), only a handful of studies consider the effects of the Common Agricultural Policy (CAP) on citizens' support for European integration. In this contribution, I argue that these two largest EU redistribution policies neutralise each other in their effects on the citizens' support for European integration: the CP improves public support due to its positively perceived redistributive nature and positive externalities, whilst the CAP decreases public support due to due to a limited target audience, somewhat elitarian distribution of resources and bureaucratic complexities. Using regional‐level CP and CAP data for 2017 and Eurobarometer surveys for 2018 and 2019, the empirical findings of multilevel regressions show that the CAP counteracts the positive effects of the CP on citizens' support for further European integration. The findings are robust to including a wide range of control variables, sample size change and alternative specifications of key independent variables. These findings also hint that policy evaluations should not disregard the differences between various policy instruments.

Balancing Efficiency and Environmental Impacts in Greek Viticultural Management Systems: An Integrated Life Cycle and Data Envelopment Approach

Greek wines excel in quality and exports, but the viticultural sector faces significant challenges from complex supply chains, shifting European policies, and the growing need for sustainability amidst climate change and economic pressures. External environmental costs could affect significantly the decision-making process of farmers, reflecting a broader evaluation of sustainability in viticulture. This study evaluates the economic and environmental impacts of organic, integrated, and conventional viticulture management systems in Drama, Greece using a life cycle (LC) approach and data envelopment analysis (DEA) to determine efficiency, quantify environmental impacts in monetary terms, and incorporate these costs into the analysis. Organic management systems have lower energy consumption and emissions compared to integrated and conventional systems, with organic systems ranging from 4546 to 6573 kWh/ha in energy use and 1358 to 1795 kg CO2 eq./ha in emissions, while integrated and conventional systems range from 9157 to 12,109 kWh/ha and 2961 to 3661 kg CO2 eq./ha. The DEA analysis reveals that most organic systems perform efficiently when accounting for environmental costs, whereas conventional systems face significant efficiency declines, with only a few maintaining optimal performance. Policy-supported transitions based on the provider gets principle are crucial for balancing economic and environmental goals in viticulture, as the integration of shadow prices significantly impacts efficiency.

Impact of environmental, social, and governance performance on cash holdings in BRICS: Mediating role of cost of capital

AbstractAs businesses globally navigate the intricate landscape of environmental, social, and governance (ESG) practices, understanding their financial implications becomes paramount. The primary objective is to illuminate the impact of ESG performance on cash holdings (CHO) within the context of the BRICS nations. Additionally, the study aims to explore the mediating role of the cost of capital (COC) in shaping these relationships. The empirical analysis was conducted on comprehensive dataset over the period 2010–2022 of BRICS. We establish the regression analysis by utilizing a fixed effect and system GMM models. The empirical findings reveal a significant negative (−0.012 coefficient value) impact of ESG performance on CHO, indicating that a one‐unit increase in ESG can decrease the CHO by 1.2% and this effect is significant at 1%. This further highlights declining trend in cash reserves among companies embracing sustainability practices. Notably, the study documents the mediating role of the COC, showcasing its influence in reducing internal cash reserves in the presence of low external financing costs. The study highlights the financial benefits associated with robust ESG practices. Companies in the BRICS nations are encouraged to integrate sustainability considerations into their business strategies, recognizing the potential for reduced CHO and favorable COC outcomes. Beyond financial gains, the study underscores the societal and environmental contributions of ESG practices. This study contributes to the literature by uncovering the mediating role of the COC, providing a comprehensive understanding of how sustainability practices influence internal cash reserves in the context of diverse economic landscapes.

Externalities on The Conversion of Mangrove into Salt Pond in Bipolo Village, Sulamu District, Kupang Regency, East Nusa Tenggara

The utilization of mangrove forest land for the expansion of salt pond areas with the aim of increasing salt production in Bipolo Village causes the loss of economic value of marine biota in the mangrove ecosystem. Mangrove ecosystem resources that are utilized as salt ponds if not accompanied by a rehabilitation process will cause a decrease in the function of the mangrove ecosystem. This will later become a challenge as well as create externalities that need attention from the Kupang district government in regulating the utilization of the mangrove ecosystem in Bipolo Village. This study aims to analyze the positive and negative externality values ??resulting from the development of salt pond businesses in Bipolo Village, Sulamu District, Kupang Regency. To determine the positive and negative externality values ??using the economic valuation method. Based on the results of the study, it is known that the salt pond business in Bipolo Village provides a negative externality value of Rp. 21,439,466,084 and a positive externality value of Rp. 235,280,000 which means that the opening of salt pond land has caused losses from the ecological side of the mangrove which is quite large compared to the benefits obtained.

Spatial Equilibria: The Case of Two Regions

In this paper we characterize the set of equilibria in a generalized version of the canonical two-region economic geography model that nests the class of models in Allen and Arkolakis (2014) as well as Krugman (1991) and features an input–output loop. We provide sufficient conditions for uniqueness of equilibria that — in contrast to the well-know result in Allen and Arkolakis (2014) — allow for positive agglomeration externalities, which concentrate economic activity, even in the absence of congestion effects, which disperse it, and highlight the key role played by three additional parameters: the trade elasticity, which regulates the strength of the dispersion force associated with the decline in the terms of trade caused by migration into a region; trade costs, which weaken this dispersion force by limiting trade across regions; and the importance of the agricultural sector, which pushes against agglomeration forces in manufacturing.

Paid Sick Leave Mandate and Its Impact on Labor Dynamics in California

The implementation of the Paid Sick Leave (PSL) Mandate in several cities and states since 2006 has enhanced workers health and productivity. This research paper evaluates the impact of PSL mandates on the weekly working hours of full-time workers in California State, using the traditional Difference-in-Difference model and Current Population Survey (CPS) data. It is found by the analysis that a notable rise in full-time employees working hours in California was experienced after the publication of PSL in 2015, contrasting with the steadily decreasing patterns in Texas. The positive impacts are confirmed by regression models. The findings depict that the PSL mandate may reduce full-time employees working hours at first glance, but its positive externalities could offset that negative impact. This study contributes a unique insight into the influence on a certain sort of workers those working full-time, instead of the labor force as a whole, and provides valuable suggestions to policymakers, employers, and workers considering the policy in a full picture.

Development of an e-governance system to support cooperative environmental policy actions

The quality of the digital infrastructure supporting decisions is an important factor in the preparation phase of any environmental policy action, and this quality can greatly reduce the level of transaction costs. However, the development of a solution for Coaseian bargaining raises several unsolved technical problems to be able to efficiently decrease external costs. Here, we show the recommended structure of an information and communication technology (ICT)-based software infrastructure that aims to guide relevant stakeholders to achieve environmental deals and enhance green innovations. After reviewing the existing methods, practical solutions, and economics of transaction costs, we selected the design process of a new platform. We identified the functionality modules of the ICT infrastructure with descriptions of the features. Our results demonstrated that the establishment of an ICT-based e-governance system featuring participatory modeling could efficiently reduce transaction costs based on the widely used typology of them. We found that our platform could improve the involvement of any group of stakeholders through collaboration. Furthermore, we elaborate on the assessment of risks and evaluate the potential to avoid serious risks during the implementation or operation of the system. We anticipate our paper to be an initial step in the implementation of an innovative platform for the interested parties of environmental policy actions.

The “locus continuum” of price increase perception – Is communicating a good cause for price increases always beneficial?

Purpose Governmental regulations aiming to protect environmental goals often require firms to increase sales prices with negative consequences on price fairness perception. Companies might therefore either justify the price increase by highlighting the good cause (environmental framing) or they could blame the government for the regulation (governmental framing). Firms might also communicate their investments in the relationship to motivate customers to stay. This paper aims to examine the impact of such communication content on price increase fairness perception and switching intention in a contractual service setting. Design/methodology/approach This paper first examines the content of 119 price increase letters from electricity suppliers in a qualitative pilot study. The main study then tests our research framework with 552 respondents using a 2 x 2 x 2 between-subjects experimental scenario design (manipulating framing, effort and regret communication). Findings Customers perceive governmental framing as fairer than environmental framing. Effort and regret communication by firms weaken or reverse this effect. They reduce customers’ fairness perception for the governmental framing, while regret communication increases it for the environmental framing. However, regret communication also increases switching intention in both framings through a strong direct effect. Research limitations/implications Cost-induced price increases are perceived on a “locus continuum” on which reason-framing and relationship investments can shift the consumer perception. Future studies may apply our framework in different industries and contexts. Practical implications The results provide guidelines for communicating price increases. Firms should prefer a governmental framing and they should also hesitate to communicate relationship investments, which signal internal locus of the firm, such as effort or regret. Originality/value Our results question the naive assumption of general positive effects of environmental framings and relationship investments on customer responses. Based on a new view on attributions of cost-caused price increases, we suggest and find several counterintuitive results. We argue that the framing and relationship investments shift the cause perception of an external cost increase on the attributional locus continuum.

Internalizing External Accident Costs in Safety Investment Evaluation Using Cost–Benefit Analysis

The primary objectives of transportation system development in European countries include improving transport efficiency, enhancing national economic competitiveness, and promoting sustainable mobility. A key aspect of achieving these goals is the evaluation of transport externalities, particularly external accident costs, which is critical for ensuring the economic and social sustainability of road transport development. This study comprehensively evaluates external road accident costs and proposes an innovative approach to internalizing these costs through a cost–benefit analysis (CBA). By integrating these external costs into CBA, policymakers can better understand the societal impact of road safety investments, allowing for more informed decisions regarding measures to reduce road accidents and fatalities. This paper also explores the role of specific safety investments, such as installing vehicle restrain systems (VRS), buffers, and terminals on the national road network, as well as installing speed cameras, in reducing accidents and mitigating external costs. The findings highlight road safety measures’ importance in enhancing economic efficiency and social well-being, providing a solid foundation for the sustainable and efficient development of transportation systems.

Can Competition Increase Profits in Factor Investing?

The increasing number of institutions exploiting factor-investing strategies raises concerns that competition may erode profits. We use a game-theoretic model to show that, whereas competition among investors exploiting a particular factor erodes profits because of the negative externality of their price impact on each other, competition to exploit other factors can increase profits from the first factor because of the positive externality from trading diversification (netting of trades across factors). Using data for 18 factors as well as mutual fund holdings, we show that competition and trading diversification substantially affect the profits from factor investing. This paper was accepted by Agostino Capponi, finance. Funding: The authors received an INQUIRE-Europe research grant for this project. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.02684 .

Environmental and social welfare effects of aviation liberalization: Evidence from Central Asia and China market

We investigate the effects of international aviation liberalization between China and Central Asia on environment and social welfare. Based on monthly international air traffic data between Central Asia and China, we estimate a random-coefficients discrete choice model and perform a counterfactual analysis to quantify the effects of improved air connectivity, mainly considering that the ratio of direct and connecting aviation services between Central Asia and Beijing is the same as those between Central Asia and Russia, between Central Asia and other former Soviet Union countries and between Central Asia and other Asian countries. The main findings are as follows. First, improving air connectivity intensifies competition in the market, resulting in a decrease in the passenger-weighted average airfares between Central Asia and Beijing by 0.86–5.15 US dollars (USD) in 2012 and an increase in the total number of passengers by 2930–20,790. Second, improving air connectivity increases total carbon emissions (CO2) between Central Asia and Beijing by 0.78–6.11 million kilograms (kg) in 2012 but also drives down per capita CO2 emissions in this market by 0.78–2.38 kg. Third, while increasing total environmental externality costs, improving air connectivity significantly enhances consumer welfare and airline profits, resulting in a net social benefit of 14.02–44.12 million USD between Central Asia and Beijing in 2012. Finally, several policy implications are discussed.