Externalities Research Articles

Positive Network Externalities and Negative Environmental Externalities in a Differentiated Duopoly With Entry Fee‐Refund Policy

Positive Network Externalities and Negative Environmental Externalities in a Differentiated Duopoly With Entry Fee‐Refund Policy

Effect of sovereign risk and debt‐side governance on cross‐border infrastructure risk premium in a developing nation: The case of Kenya

AbstractMotivationDeveloping countries' reliance on foreign capital for large‐scale infrastructure projects makes sovereign risk premium and debt‐side governance practices key determinants of cross‐border infrastructure risk premiums.PurposeThis study estimates the effect of international sovereign bond spreads (systematic risk) and debt‐side governance (unsystematic risk) on cross‐border infrastructure risk premiums in Kenya's major infrastructure projects from 2011 to 2020.Approach and methodsWe use pooled and random‐effects panel data analysis of secondary data.FindingsThe findings show that rising international sovereign bond spreads (ranging from 9.6% to 32.39%), corruption levels, external debt‐to‐import ratios, loan utilization rates, disbursement delays, and climate risk disclosure significantly contributed to increasing cross‐border infrastructure risk premiums. The interaction between bond spreads and corruption had a compounding effect in increasing cross‐border infrastructure risk premiums. On the other hand, longer loan maturities, higher internal rates of return, substantial government involvement, and a rising external debt to total investment ratio reduce project risk premiums.Policy implicationsThese findings underscore the need for Kenya's modern Public Debt Management Office and infrastructure execution institutions to reduce external borrowing costs through governance reforms that improve transparency, project oversight, and environmental standards. By strengthening debt‐side governance, Kenya can reduce its external borrowing costs and improve the sustainability of infrastructure‐led debt. As such, the study offers actionable insights for low‐ and middle‐income countries, emphasizing the role of modern sovereign debt management tools that target sustainability and strategic governance reforms at the project level in attracting more favourable borrowing rates for infrastructure financing.

Cost–Benefit Analysis of Bus Fare Subsidies under Financial Constraints: The Case of Asunción, Paraguay

Abstract We develop a model to perform a cost–benefit analysis of bus fare subsidies under financial constraints that preclude the purchase of additional buses. Our model considers users’ costs in the provision of bus services and the lack of road pricing to internalize urban transport externalities in a context where financial constraints severely limit the institutional ability to plan and design the bus system. Because of financial constraints, the bus system can hardly accommodate demand during peak times: buses travel overcrowded, passengers cannot board the first bus to arrive at the bus stop, and they cannot arrive at their destination at their desired time. Another salient aspect of our model is the inclusion of motorcycles as a second private transport mode. Motorcycles are typical in many urban agglomerations in the emerging world and engender many negative transport externalities. According to our results, fare subsidies provide social benefits in Metropolitan Asunción. During peak hours, a higher subsidy is justified as the reduction of the unpriced external costs of substitute modes compensates for the increased cost created by an additional bus passenger. In the off-peak, a higher subsidy is justified (i) as the higher frequencies induced by the new bus ridership reduce waiting times and (ii) because of the reduction of the unpriced external costs of substitute modes. Although our model does not explicitly include inequality aversion, we discuss the distributional aspects of subsidies in the context of middle-income countries.

Does competition from informal firms impact new product development? Systematic replication and extension of McCann and Bahl (2017)

The strategic consequences of informal rivalry have attracted little systematic academic scrutiny. McCann and Bahl is one of the first studies to examine the link between the threat of informal competition and new product development by formal firms in developing economies. Grounding their logic in attention-based view, McCann and Bahl find a positive association between informal competition and development of new products, which is weakened by the presence of formal firms, prevalence of irregular payments, and optimism about the regulatory environment. Our investigation examines the reproducibility of McCann and Bahl with the same data and its replication in a different time-period and across different country sub-samples. To address potential endogeneity concerns, we conduct instrumental variable regression and control function analysis, using two distinct instrumental variables. Building on the framework of the original investigation, we emphasize the importance of addressing endogeneity across different country samples both theoretically and empirically. Our findings provide novel empirical evidence on the significance of time and space as boundary conditions in understanding the positive externalities of informal competition.

Internalizing the external costs to achieve environmental and economic Goals: A Case study of rice production in China

Internalizing the external costs to achieve environmental and economic Goals: A Case study of rice production in China

KEY CRITERIA AND INDICATORS FOR ASSESSING MANAGEMENT EFFECTIVENESS

This paper explores the pivotal role of management in fostering economic growth an area that has receivedcomparatively less attention in both theoretical and empirical literature than entrepreneurship. By examining the dynamicrelationship between management and entrepreneurship, the study demonstrates that effective management practicesare essential for optimizing resource allocation, enabling strategic decision-making, and adapting to evolving economicconditions. Moreover, it emphasizes the significance of strong institutions and sound governance in facilitating economicactivities and lowering external financing costs, especially in low- and middle-income countries. The findings indicatethat improved economic management enhances creditworthiness, reduces growth volatility, and strengthens economiccompetitiveness, thereby contributing to long-term sustainable development. The paper concludes that managementis as vital as entrepreneurship in driving economic progress and calls for further research to investigate the broaderdimensions of management efficiency.

Optimizing Bioethanol Production by Comparative Environmental and Economic Assessments of Multiple Agricultural Feedstocks

This study assesses the sustainability of bioethanol production from multiple agricultural feedstocks, including corn stover, wheat straw, and rice husk, using a life cycle assessment (LCA) method. The process focuses on converting lignocellulose biomass into bioethanol through advanced biotechnology, enriching energy security and supporting sustainable development in Pakistan. The process includes various stages of feedstock utilization, including cultivation, harvesting, transportation, preprocessing, and conversion, eventually yielding 1 kg of bioethanol with different inventories for each of the three feedstocks. A comparative analysis of the three feedstocks reveals that the wheat straw showed the highest environmental impacts, while rice husk exhibits the least environmental impacts and emerges as a more sustainable and viable option for bioethanol production. The economic assessment revealed the feasibility of bioethanol production, achieving a daily revenue of $9600 and a monthly income of $211,200, based on 22 working days in a single 8 h shift. The total initial capital investment cost was estimated at $478,515, while operational costs were calculated at $225,921. The external cost of the plant was evaluated at $14.23. Transitioning from grid-mix to renewable energy, such as photovoltaic systems, showed a reduction among three feedstocks. Therefore, bioethanol production not only addresses waste management challenges but also contributes to waste-to-energy conversion and renewable energy generation, aligning with public health goals and sustainable development. The findings highlight the potential of bioethanol production as a strategic solution to manage agricultural waste sustainably and reduce greenhouse gas emissions.

Economic Impacts of Reducing Bovine Trichomoniasis Prevalence in the US Beef Industry

Abstract Bovine trichomoniasis is a venereal disease that causes significant losses in the US beef industry. The USDA Animal and Plant Health Inspection Service views bovine trichomoniasis as endemic and delegates control to state agencies and producers. Disease management’s positive externalities are not reflected in a producer’s profit maximization problem, leading to potentially suboptimal levels of control. Our objective was to assess the economic impacts of 50% and 100% reductions of herd-level bovine trichomoniasis prevalence. The cumulative present value of net welfare increased by $388.856 and $193.222 million under the 100% and 50% scenarios, respectively. Feeder cattle producers and retail beef consumers benefit most from enhanced control.

On the Effectiveness of Gender Quotas: Insights From Shareholder Preferences

ABSTRACTResearch Question/IssueThis study examines whether the shareholder preferences for female directors alter around the introduction of mandated gender quotas in France. In addition, we analyze whether shareholders revalue female qualifications different from male ones around quota introductions.Research Findings/InsightsWe observe greater shareholder support for female nominees subsequent to the quota introduction. However, the disparities in voting outcomes between female and male nominees can be entirely explained by controlling for director characteristics. This suggests that female directors, with valuable characteristics such as independence, are to a greater extent nominated post‐quota. An important discovery from our analysis is that shareholders revise their assessment of female qualifications post‐quota, thereby establishing female qualifications as equally valuable as those of their male counterparts.Theoretical/Academic ImplicationsContrary to the arguments of gender quota opponents, our findings indicate that the supply of qualified female candidates meets the quota induced incremental demand. The results suggest that the prior underrepresentation of female directors stems from director labor market frictions. Overall, our study has significant implications for the ongoing debate concerning mandated gender quotas in shaping corporate governance practices.Practitioner/Policy ImplicationsOur analysis has policy implications, as neither shareholder votes for female directors nor the stock market reactions around the quota introduction show evidence of mandated gender quotas having adverse effects. Instead, we observe positive externalities by altering shareholders' perceptions of the qualifications of female directors. This suggests that mandated gender quotas can serve as a pivotal catalyst for change, even in countries with notably low female pre‐quota board representation.

Analysis of the Application of Environmental Accounting at PT. Perusahaan Gas Negara Tbk on the Indonesia Stock Exchange (IDX) and its compliance with the Global Reporting Initiative (GRI) standards

This study examines the implementation of environmental accounting at PT Perusahaan Gas Negara Tbk based on Global Reporting Initiative (GRI) standards. Using a qualitative descriptive approach, the research assesses whether the company's environmental accounting system and sustainability report are appropriately presented. The findings indicate that the company's sustainability report includes environmental cost reporting, eco-friendly material reporting, energy reporting, biodiversity reporting, emissions reporting, waste and effluent reporting, and water reporting, all aligned with GRI standards. Additionally, the company provides environmental cost reports covering prevention, detection, internal failure, and external failure costs.

FastFrame Knee Spanning External Fixation Associated With Lower Cost Than Modular Frame Configurations: A Comparative Cohort Study.

External fixation costs have been identified as a primary driver of initial cost in the care of tibial plateau fractures. Because hospital systems and institutions pursue value-based care, external fixation choices become a uniquely surgeon-dependent driver of cost. Our objective was to determine differences in cost in a prepackaged, single-use, external fixation system compared with standard, modular, knee spanning frames. Secondary objectives were to determine differences in surgical time and loss of distraction between the two types of fixation. This was a retrospective cohort study at an academic level 1 trauma center. Fifty-nine patients were treated with knee spanning external fixation over a 7-year period (Arbeitsgemeinschaft fur Osteosynthesefragen/Orthopedic Trauma Association 41-B/C). Patients received either the Zimmer FastFrame external fixator or a conventional-style, modular, external fixator. The primary outcome was implant and supply cost. The secondary outcomes were operating room facility cost, surgical time, and percent of distraction lost. The FastFrame cohort demonstrated a 24.9% decrease in surgical times (29.2 vs. 38.9 minutes, P = 0.002), with a 37% decrease in supply and implant cost of conventional cohort (0.63x vs. 1x, P < 0.001). Operating room facility cost was less than the conventional cohort (0.72x vs. 1x, P = 0.41), and total cost was 21.8% less (0.78x vs. 1x, P = 0.07), although these did not reach statistical significance. The Fastframe cohort lost less distraction (72.6% vs. 62.8%, P = 0.02). The FastFrame demonstrates a lower supply and implant cost, faster surgical times, and demonstrated clinical equivalence in regard to loss of distraction when compared with conventional, modular, external fixator. Diagnostic-Level III.

Should social networks inform their users about the prices they charge advertisers?

ABSTRACT Positive intra-group and negative inter-group externalities naturally exist in the environments of digital platforms, such as social media platforms in a two-sided market. Consider a scenario where one group of agents (advertisers) is informed and holds responsive beliefs, while the other side (users) is uninformed and holds passive beliefs. For a monopoly platform, platform profit is lower when users are uninformed. However, advertiser surplus increases under uninformed conditions. User surplus and social welfare are only higher under uninformed conditions if the intra-group externality is sufficiently small. In competitive market structures, platform profits remain lower when users are uninformed, while advertiser surplus is consistently higher. In a single-homing duopoly, user surplus and social welfare remain unaffected by user information conditions. Conversely, in competitive bottleneck markets, user surplus increases when users are uninformed. Social welfare, however, is higher under uninformed conditions only if the negative inter-group externality is sufficiently small. When users adopt wary beliefs, regardless of market structure, equilibrium outcomes always lie within the range defined by the extremes of fully informed and uninformed users with passive beliefs. This paper suggests that platforms should inform their users about the prices they charge advertisers, but it may be socially desirable under uninformed conditions.

Artificial intelligence and corporate ideation systems

AbstractMany companies leverage the creativity of their employees to gather ideas for innovations. These ideas are collected, saved, and evaluated via platforms known as corporate ideation systems. Moderated ideation systems (ideation 2.0) emerged as a solution to address the limitations of traditional, rather passive ideation systems (ideation 1.0). In this study, we apply a qualitative mixed‐method approach (literature review, company case studies, expert interviews, and focus group workshops) to examine how artificial intelligence (AI) technology may relieve the remaining pains of stakeholders in collaborative, moderated ideation systems. This leads to a new framework of corporate ideation systems, termed AI‐based ideation systems (ideation 3.0). We identify five major pains suffered by stakeholders in today's moderated ideation systems: creativity pain, content formulation pain, search pain, analytical pain, and administration pain. We find that AI agents act as pain relievers when serving five supporting functions: inspirer, stylist, matchmaker, analyst, and organizer. The interconnected nature of pains means that employing AI agents in certain functions within corporate ideation systems can create positive externalities across the entire system. Practical insights into AI agent implementation and application in corporate ideation systems are provided by six mini‐case studies, which lead to the proposition of two organizational principles: the contextualization of AI usage and the generalization of AI implementation as the requirements for successful ideation 3.0.

Implementation of Open Jackson Queueing Network on Customer Service and Ticket Service at Pasar Senen Train Station Jakarta

The increase in the number of users of train services causes a buildup in various service facilities, which affects the quality and efficiency of services. This study aims to optimize the service system at Pasar Senen Station by applying the open Jackson queueing network model using the First Come First Serve discipline. The data used includes external arrival times, service times, and cost components at three main facilities: customer service locket, ticket counter locket, and ticket vending machine locket. The results showed that optimal performance was achieved at the ticket counter (M/M/3) and ticket vending machine (M/M/2) with a busy level of 82.14% and 62.66% respectively. Simulation of reducing the number of servers in customer service to two (M/M/2) results in a busy level of 77.95% and lower total costs.

Asset Redeployability and Corporate Liquidity

ABSTRACTThis article documents reduced cash holdings for firms with redeployable assets. This finding holds for instrumental variables and matched sample analyses. Additional evidence suggests that firms with redeployable assets shift from cash holdings to credit lines, presumably because the nature of these assets reduces the premium of credit lines as a form of liquidity insurance, especially for firms that face high external financing costs. Banks provide these firms with borrower‐friendly ex ante contract terms and protect themselves from ex post risk shifting via the increased use of asset sweeps. The evidence highlights the interplay between the liquidity of short‐ and long‐term assets.

A Location-Allocation Model for Food Distribution in Post-Disaster Environments

Abstract This research investigates the optimal location decisions in a food distribution network in post-disaster environments. We propose a location-allocation model for a food bank network that minimizes the total social costs generated by distributing food supplies to disaster survivors. The social costs include the costs of the delivery operation and the external costs of the survivor’s suffering in the form of deprivation costs. This model incorporates an empirically estimated deprivation cost function for food and water supply, which is non-linear with respect to the survivor’s deprivation time. We define the deprivation time as the time a survivor has to wait for the delivery, which includes their travel time to the point of distribution (POD) and their expected wait there to receive the critical supplies. The model proposes the optimal location of PODs (i.e., food pantries) and their allocation to demand zones for food distribution following a disaster, along with a relief distribution strategy. We used the Houston Food Bank network to test the feasibility of activating the nodes as a relief distribution network that could serve the impacted community. The instances aim to mimic a potential design that would have been implemented in response to a future disaster like Hurricane Harvey in 2017. It also addresses the impact of location on delivery frequencies and shipment sizes. The results provide practical insights that can help prioritize the needs of survivors during an emergency or disaster event.

Public Disclosure of Private Meetings: Does Observing Peers’ Information Acquisition Affect Analysts’ Attention Allocation?

ABSTRACTWe investigate the impact of observing peers’ information acquisition on financial analysts’ allocation of attention. Using the timely disclosure mandate by the Shenzhen Stock Exchange as a setting, we find that, shortly after analysts observe that a firm has been visited by peer analysts, they reduce short‐term attention to that firm, as indicated by a reduced tendency to conduct follow‐up visits. Nonvisiting analysts who do not conduct follow‐up visits are more likely to discontinue coverage of the visited firm. These findings are consistent with the conjecture that the timely disclosure reveals the first‐mover advantage of visiting analysts, leading nonvisiting ones to reallocate their limited attention. We also find that, compared with the pre‐mandate period, the information environments of visited firms deteriorate immediately after an analyst's visit but not over the longer term. Further evidence suggests that the timely disclosure mandate has positive externalities in the form of increased immediate attention to and improved short‐term information environments of unvisited peer firms.

Reducing environmental impact: The case of inland waterway transport in Lithuania

It is an established fact that numerous active EU policy initiatives are aimed at reducing the Union’s environmental impact. Since the transport sector is one of the greatest polluters in the EU, there is a growing focus among the scientific community on the use of renewable energy sources for road transport. However, inland waterway transport has not been receiving sufficient attention. The aim of this paper is to demonstrate the benefits of developing inland waterway transport, with particular focus on reducing the environmental impact of the transport sector. The study examines the example of cargo transport for the Kaunas-Klaipeda route in Lithuania. The impact on the main external costs is calculated through modelling and comparison and the findings show that external costs are lower when transporting goods by rivers. A positive environmental impact of modal shifting is also evident when a part of the freight flow is transferred from a heavily-used road to a river with a high reserve capacity (despite the greater distance along the river). Further, the research conclusions suggest that the use of alternative power drives will help to achieve emission-free inland shipping in the future. Finally, a market analysis in relation to the potential transition to river transport with zero emissions has yielded evidence that electric ships represent the most viable alternative power drive option for achieving this objective via this route.

How does industrial intelligence affect the ecological efficiency of China's mariculture industry? Empirical analysis based on panel data from coastal regions of China.

How does industrial intelligence affect the ecological efficiency of China's mariculture industry? Empirical analysis based on panel data from coastal regions of China.

The costs of subsidies and externalities of economic activities driving nature decline.

Economic sectors that drive nature decline are heavily subsidized and produce large environmental externalities. Calls are increasing to reform or eliminate subsidies and internalize the environmental costs of these sectors. We compile data on subsidies and externalities across six sectors driving biodiversity loss-agriculture, fossil fuels, forestry, infrastructure, fisheries and aquaculture, and mining. The most updated estimates suggest that subsidies to these sectors total between US$1.7 and US$3.2 trillion annually, while environmental externalities range between US$10.5 and US$22.6 trillion annually. Moreover, data gaps suggest that these figures underestimate the global magnitude of subsidies and externalities. We discuss the need and opportunities of building a baseline to account for the costs of subsidies and externalities of economic activities driving nature decline. A better understanding of the complexity, size, design, and effects of subsidies and externalities of such economic sectors could facilitate and expedite discussions to strengthen multilateral rules for their reform.