Foregone Revenue Research Articles

Wind power and the cost of local compensation schemes: A Swedish revenue sharing policy simulation

Local resistance towards wind power is a central challenge for the energy transition, implying that legally imposed compensation schemes for nearby residents may become prevalent in the near future. I use GIS-coded data on detached residential buildings in Sweden to simulate a variety of revenue sharing schemes applied to every present and planned commercial scale wind power project, focusing on documenting the impact on investor costs. I compare models that entitle compensation for distances between six and ten times the tip height of the closest turbine, imposing schemes that are both constant within the eligible distance, as well as declining with the distance from the turbine. When compensations are awarded for residents as far away as ten times the turbine height, foregone revenues exceed two percent for one-fourth of the projects in the southern region even under the declining model, indicating that the scheme could have a substantive effect on the localization decisions of future investments.

Tax expenditures and progress to the Sustainable Development Goals

AbstractThis study reports the impact of governments having additional revenue equivalent to tax expenditures on achieving the Sustainable Development Goals in 97 countries. The study draws data on revenue foregone from the Global Tax Expenditure Database. To analyze the potential of an increase in government revenue equivalent to the revenue foregone, the study uses the Government Revenue and Development Estimations modeling. The study finds that if governments had additional revenue equivalent to tax expenditures: an additional 17 million children would attend school (13.62% currently out of school), an additional 70 million people would use basic water (23% of those without access), 146 million would use basic sanitation (20% of those without access), 181,000 children would survive (13% of children who currently die), and 12,000 mothers would survive (16% of mothers who currently die). Critically, there would be improvements in governance indicators in all regions. Foregone revenue from tax expenditures could increase access to public services for millions, which is the most effective tool for reducing inequality and driving progress toward sustainable development. The massive opportunity costs reported here require all governments to report and justify their annual tax expenditure.

Commodity storage and the cost of capital: Evidence from Illinois grain farms

AbstractCommodity inventories are the key state variable determining the magnitude of commodity price responses to supply and demand shocks. Many firms in commodity supply chains use storage, but we know little about which firms and why. The economic theory of storage asserts that firms in a competitive market for inventories will store based on current and expected market prices and the per‐unit cost of storing. We empirically test at the firm‐level the importance of one major cost of storage: the opportunity cost of capital used to value foregone revenue from deferred commodity sales. To do so, we use panel data from thousands of Illinois farms who hold inventories of corn and soybeans. Although interest rates as a measure of capital costs are unlikely to vary widely across firms in this context, we exploit variation in the weighted average cost of capital due to cross‐firm differences in capital structure. Using two‐way fixed effects regressions, we find a statistically significant average effect of capital costs on inventory that masks notable heterogeneity across firms. Panel quantile regressions reveal two groups of firms: one whose inventory holdings are responsive to changes in the opportunity cost of storage and another whose are not. Our results suggest some farms behave like the profit‐maximizing ones from theory but substantial inframarginal commodity inventories are held by farms for other reasons.

The Cost Shifting Economics of United States Emergency Department Professional Services (2016–2019)

We estimate the economics of US emergency department (ED) professional services, which is increasingly under strain given the longstanding effect of unreimbursed care, and falling Medicare and commercial payments. We used data from the Nationwide Emergency Department Sample (NEDS), Medicare, Medicaid, Health Care Cost Institute, and surveys to estimate national ED clinician revenue and costs from 2016 to 2019. We compare annual revenue and cost for each payor and calculate foregone revenue, the amount clinicians may have collected had uninsured patients had either Medicaid or commercial insurance. In 576.5 million ED visits (2016 to 2019), 12% were uninsured, 24% were Medicare-insured, 32% Medicaid-insured, 28% were commercially insured, and 4% had another insurance source. Annual ED clinician revenue averaged $23.5 billion versus costs of $22.5 billion. In 2019, ED visits covered by commercial insurance generated $14.3 billion in revenues and cost $6.5 billion. Medicare visits generated $5.3 billion and cost $5.7 billion; Medicaid visits generated $3.3 billion and cost $7 billion. Uninsured ED visits generated $0.5 billion and cost $2.9 billion. The average annual foregone revenue for ED clinicians to treat the uninsured was $2.7 billion. Large cost-shifting from commercial insurance cross-subsidizes ED professional services for other patients. This includes the Medicaid-insured, Medicare-insured, and uninsured, all of whom incur ED professional service costs that substantially exceed their revenue. Foregone revenue for treating the uninsured relative to what may have been collected if patients had health insurance is substantial.

Implications of the energy transition for government revenues, energy imports and employment: The case of electric vehicles in India

Whereas the environmental benefits of transitioning away from fossil fuels are becoming indisputable, the implications for government revenues, employment, balance of trade, and employment appear less clear. Using an accounting-like framework, we analyze the potential near to medium-term implications of electric vehicles displacing internal combustion engine (ICE) vehicles. Total cost of ownership (TCO), imports, government revenues, employment and greenhouse gas (GHG) emissions are each lower with EVs under different market and policy scenarios considered. An exception is a steep fall in oil prices (say by 50% from current levels), which increases net energy imports when battery cells are imported. Targeting high usage vehicles for EV adoption amplifies reduction in TCO, GHG emissions and imports but also leads to greater reduction in tax revenues. Furthermore, foregone tax revenues from avoided fossil fuel consumption is several times greater than the subsidies to EVs in the form of preferential tax rates. On a per vehicle basis, each fossil fuel vehicle generates over six-fold greater taxes over its life relative to an EV. Whereas economic growth and public policy can mitigate adverse impacts on government revenues and employment, simultaneously reducing total emissions as well will, if history is a guide, be more challenging.

Emergency Department Embedded Palliative Care Service Creates Value for Health Systems.

Background: Emergency department (ED)-initiated palliative care consultation facilitates goal-concordant care while stewarding resource utilization. Delivery models are being piloted without clear operational and financial sustainability. Objective: To demonstrate that embedding a palliative care consultation service in the ED is clinically meaningful, operationally viable, and yields significant return on investment (ROI). Methods: Quasi-experimental study from August 17, 2020 to August 17, 2021. We established an ED-embedded palliative care consultation service at a 350-bed urban community hospital with 45,000 annual ED visits. A singe palliative care provider stationed in the main ED workstation area from 11 am to 7 pm daily. Matched analysis compared ED-embedded consultations against Floor and intensive care unit (ICU) consultations originating from usual practice. Results: ED consultations increased 10x, without cannibalization, to become the hospital's primary source of palliative care consultations. Clinical outcomes were meaningful, with 49% changing code status, 11% admitting to lower level of care, 11% avoiding hospitalization, 17% newly referred to hospice, and 21% newly referred to palliative care clinic. ED length of stay (LOS) did not lengthen, and ED staff strongly agreed that the service was valuable and unobtrusive. Compared with Floor, ED consultations had 8.1 days shorter hospital LOS (3.0 vs. 11.1 days, p < 0.01) with $5,974 lower median direct costs for index hospitalization ($6,211 vs. $12,005, p < 0.01). Compared with ICU, ED consultations had 4.2 days shorter hospital LOS (3.0 vs. 7.2 days, p < 0.01) with $9,332 lower median direct costs for index hospitalization ($14,093 vs. $23,425, p < 0.01). ROI was 6.7x net of foregone revenue and labor expenses. Conclusions and Relevance: This ED-embedded palliative care consultation service was clinically meaningful, operationally viable, and delivered a 6.7x ROI. ED-palliative partnerships present a quadruple aim opportunity to improve care for seriously ill patients.

Disequilibrium effects from misallocated markets: An application to agriculture

AbstractPrices and the allocation of resources are essential components of efficient markets. Yet due to market failures or other imperfections, observed prices, and the allocation of resources can diverge from socially optimum equilibria, misinforming private and public decision making and distorting welfare. In this study, we present a two‐step framework for valuing market inefficiencies and the foregone monetary value from disequilibrium. Specifically, we measure the degree that observed prices and quantities diverge from equilibrium and capture this divergence in terms of foregone revenue impacts. Empirically, we illustrate this framework using Indian agricultural data, where we estimate that on average and over the study period this particular market has been underpriced and overproduced compared to the estimated efficient equilibrium. The potential additional gains in value to Indian agriculture from correcting this market disequilibrium ranges from $11 billion USD to $75 billion USD depending on the degree of disequilibrium and the adjustment level.

Phasing out the blast furnace to meet global climate targets

Phasing out the blast furnace to meet global climate targets

Estimating economic losses to small‐scale fishers from shark conservation: A hedonic price analysis

AbstractUnderstanding wildlife markets is central to effective conservation: it can help managers and policy‐makers to predict how interventions might influence supply and demand of wildlife products, and economic welfare of wildlife users; and thus, design interventions which have better outcomes for wildlife and people. Here we apply a revealed preference method of economic valuation—hedonic price analysis (HPA)—to understand shark markets and explore the economic costs of shark conservation for small‐scale fishers. We focus on a targeted semi‐commercial shark fishery in Indonesia—which poses a threat to some shark species, but provides important economic and subsistence value for a coastal community in an impoverished region of Indonesia—and use HPA to estimate market prices and welfare measures for threatened and CITES‐listed sharks. This represents a pertinent case study with practical implications because Indonesia is the world's largest shark fishing nation, where management interventions to reduce shark fishing mortality are needed. However, such interventions will create short‐term socio‐economic trade‐offs for fishing communities, which may hamper cooperation and compliance, and raise concerns regarding the fairness and equity of conservation. Our results give significant marginal price estimates for five species of conservation and commercial importance. Dusky sharks (Carcharhinus obscurus) and bottlenose wedgefish (Rhynchobatus australiae) have the highest implicit marginal prices, at US$ 157 and US$ 144, respectively. Our estimates suggest that conservation measures, such as catch limits for endangered and CITES‐listed species, could have significant economic opportunity costs (i.e., 3.4–17.6% revenue foregone) for low‐income fishers. Innovative policy instruments are required to transform shark markets and fisheries—to effectively reduce threats to endangered species and implement CITES, whilst doing no harm to vulnerable coastal communities. Methods from econometrics can help conservation scientists to better understand wildlife markets, and make management decisions which create better outcomes for wildlife and people.

Special Economic Zones and Free Trade Enclaves: A Troubled Existence After India: Export Related Measures (Panel) Ruling?

Special Economic Zones (SEZs) and Free Trade Zones (FTZs) are special trade or manufacturing enclaves within the territory of a State governed by a different set of laws and regulations than the rest of its territory. They form an essential part of the economic development, trade, and investment policy of several developed countries as well as emerging economies. In 2018, the United States challenged, among other measures, certain incentives which India had provided to SEZs, Export Oriented Units, Biotechnology and Electronics and Hardware Parks (EOU/EHTP/BTP) under India’s Foreign Trade Policy. These incentives were challenged as prohibited export subsidies under the Agreement on Subsidies and Countervailing Measures (SCM Agreement). While the Panel found against India, some of the issues adjudicated in the Panel report have implications for SEZs, FTZs and other similar entities located in such special enclaves. This article seeks to examine some of the key implications of this dispute on the functioning of deemed foreign trade zones within the territorial bounds of a WTO member. Of particular focus is, how WTO Members can implement the SEZs or other Trade Zones without inviting adverse outcomes. In addition, the article examines the contentious issue of the operation of the phase-out period for export subsidies under Article 27.2 of the SCM Agreement, which is of particular importance to a number of developing countries. Special Economic Zones, WTO, SCM Agreement, United States, India, fiscal incentives, revenue foregone, Footnote 1, Article 27, Annex VII, developing countries, cross-border zones

Determinants of Feedlot Cattle Death Loss Rates

Death loss in feedlot cattle can have significant impacts on feedlot profitability. Not only does death loss result in foregone revenue, but the operation still incurs the costs to date associated with those animals. This study uses pen-level feedlot data from a private feed-lot in the Southern Great Plains. Both company- owned and customer retained ownership cattle are included in the data set. A Tobit model is used to analyze pen characteristics’ influence on death loss in feedlot cattle, including cattle characteristics, source characteristics, management characteristics, and treatment incidence. Results imply that several pen characteristics impact death loss and that cattle source, in terms of both cattle source geographic location and market source type, has a significant influence on death loss rate.

Just transitions: Histories and futures in a post-COVID world

The energy landscape is changing dramatically. Communities are being impacted in different ways. Positive impacts include reductions in air pollution and new tax revenues from renewables. Negative impacts include lost jobs and foregone tax revenues after closure of large fossil fuels generation facilities and coal mines. The contours of this transition have been further altered by recent events such as the global oil market crash and the COVID-19 pandemic. While economic and social issues can be addressed through thoughtful policy design, the pace of change, and the extent to which communities have a say in what comes next, matter. Though the technical issues of transitions are well-researched, the socio-economic aspects of the energy transition remain both emergent and essential to an equitable transition to a low-carbon energy system. This article provides an overview of the history and current status of just transitions.

Medicated‐Feed Intervention in Catfish Farming: An Economic Perspective

AbstractCatfish farmers manage several bacterial diseases on their farm operations. Among them, enteric septicemia of catfish (ESC) is the most widespread and economically significant disease. Farmers have limited ESC management choices, primarily through feed restriction or treatment with medicated feed (Aquaflor [florfenicol] or Romet [ormetoprim sulfadimethoxine]). However, the management of ESC on catfish farms has economic implications given the production losses associated with the feed restriction approach and the expense of medicated feeds. This relative economic study evaluated the economics of ESC management on commercial catfish operations using medicated feeds as opposed to the feed restriction approach. The relative economic benefit of disease management varied depending on the nature of the catfish production phase, degree of disease progression, and intensity of culture practices. This study provides economic justification for the use of medicated feeds as opposed to restricted feeding in the fingerling production phase, with net benefits ranging from US$1,600/acre to $1,800/acre. However, its use in food fish production should involve consideration of various factors, such as the market price of the fish and the foregone revenue along with production aspects, such as the size of the fish and the intensity of culture practices. The study underscores the economic importance of medicated feeds in the judicious management of bacterial diseases in catfish farming.

UN MTC Article 8: Was the Source Rule Surrender on Article 8 a Blunder? The Case Study of Pakistan

The United Nations Model Tax Convention (UN MTC) Article 8 allocates taxing rights on international traffic to the state of effective management. Article 8 (Alternative B), however, to the extent of shipping, conditionally allows some taxing rights to source state, too. The study posits that by surrendering source rule on Article 8, UN MTC ditched developing countries. This allowed airlines and shiplines stationed in developed countries not only generate large sums of revenues by hitting developing countries’ ports but also repatriate them tax free to a sustained disadvantage to the developing countries. The costs of the source rule surrender for the developing countries were realized on account of soft outflow of hard-earned foreign exchange, foregone revenues, and stunted growth of critical communication industries. It is argued that Pakistan’s aviation and maritime industries’ decent rise through 1950s, 1960s, 1970s and 1980s, and their abject descend into chaos through 1990s, 2000s and 2010s is explainable in terms of double taxation agreements (DTAs) obtaining Article 8 it signed. The insights gleaned are generalizable to other similarly circumstanced developing nations whose aviation and maritime industries failed to keep pace with their overall development. The UN MTC’s surrender on Article 8, it is posited, promoted mass-scale injustice at inter-state level, and therefore, needs correction. UN Model Tax Convention, UN MTC Article 8, International Traffic, International Shipping, International Aviation, Reciprocal Exemption, Territoriality, Double Taxation Agreements, DTAs and Developing Countries, Tax Base Erosion

The Positive Revenue and Economic Impact of Section 179D The Commercial Buildings Energy-Efficiency Tax Deduction

The United States Internal Revenue Code has had a tax deduction for the design of energy efficient public or commercial buildings since 2005. However, this tax break has always been a short-term provision, extended near year end for a year or two at a time, largely because of budget exigencies created by Congressional PAYGO rules. Since the provision ostensibly costs the federal government a modicum of foregone revenue, Congress must find a way to make up for that revenue. However, a proper accounting for the true cost savings from reduced energy consumption from the implementation of 179D would demonstrate that the provision almost assuredly saves governments--the federal, state, and local altogether--money from its implementation, by allowing local governments to overcome purely political short-term budget constraints and allowing them to make decisions that are best for taxpayers in the long run by incentivizing cost-effective energy-saving investments.

Understanding biological and socioeconomic tradeoffs of marine reserve planning via a flexible integer linear programming approach

Analyzing tradeoffs among ecological, economic, and management goals with respect to marine reserve network design is an important facet of systematic conservation planning. We designed an integer linear programming model to quantify tradeoffs among five marine reserve network aspects: ecological conservation value, economic opportunity cost, geographic domain size, total reserve area, and reserve spatial compactness. Using ecological and economic data from the Hawaiian deepwater bottomfish fishery as a case study, an integer linear programming model was designed to choose areas that 1) maximize conservation value and 2) minimize opportunity cost, defined as foregone fisheries revenue. Compromise solutions that equally weighted conservation value and opportunity cost resulted in solutions with dramatically lower foregone fisheries revenue and a relatively small loss in conservation value compared to solutions with the maximum conservation value. When opportunity cost was assumed uniform across the spatial domain, solutions had considerably higher foregone revenue for a given level of conservation value, highlighting the drawback of not including a spatially explicit metric of opportunity cost in reserve selection models. Inclusion of only indicator species, rather than the entire species complex, in the optimization led to considerable representation gaps in conservation value for non-included species. We found that optimizations performed at the archipelago scale provided geographically disproportionate reserve allocations and thus disproportionate conservation benefits and socioeconomic impacts across geopolitically distinct island regions. We showed how reserve selection models can be used to support systematic conservation planning exercises characterized by many diverse and conflicting objectives and parties.

The State of Our Unions: Exploring Relationship Quality among Dyadic Couple Homeowners

Relationship stability represents a major economic interest not only to Florida, but to every state in the nation. The cumulative expenses related to relationship dissolution (including litigation costs, foregone tax revenues, and federal assistance programs such as Medicaid, child welfare SCHIP, TANF, WIC and SNAP) are estimated to cost taxpayers billions annually. Overall detriments are also higher when considering longitudinal impacts of family instability on affected couples and children in terms of lost productivity and psychosocial impact. This study endeavors to better understand threats to family instability, relationship quality and contextual factors via data collected from a sample of Florida homeowners in three types of cohabiting relationships. Analysis shows that roughly 60% of the variability in relationship quality is accounted for by negative interaction and consensus scores. High measures of negative interaction among dyadic couples indicate that cohabiting relationships in Florida are significantly distressed. Implications for how residents of Florida and other states could benefit both economically and psychosocially from implementation of couple and relationship education (CRE) programs are discussed.

Modeling coordination between renewables and grid: Policies to mitigate distribution grid constraints using residential PV-battery systems

Distributed photo-voltaic (PV) generation is one of the pillars of energy transitions around the world, but its deployment in the distribution grid requires costly reinforcements and expansions. Prosumage – consisting of a household-level PV unit coupled with a battery storage system – has been proposed as an effective means to facilitate the integration of renewable energy sources and reduce distribution grid stress. However, tapping its full potential requires regulatory interventions; otherwise, system costs could rise despite increasing flexibility. We analyze the effectiveness of different policy schemes to mitigate the need for distribution capacity expansion by incentivizing beneficial storage operation. Our novel top-down modeling approach allows analyzing effects on market prices, storage dispatch, induced distribution grid requirements, system costs, and distributional implications. Based on German power system data, numerical results indicate that distribution grid requirements can be reduced through simple feed-in policies. A uniform limit on maximum grid feed-in can leave distribution system operators better off, even if they fully compensate prosumage households for foregone revenue. Policies imposing more differentiated limits at the regional level result in only marginal efficiency improvements. Complete self-sufficiency (autarky) is socially undesirable, as it confines important balancing potential and can increase system costs despite adding storage.

The Measurement of Environmental Economic Inefficiency with Pollution-generating Technologies

This study introduces the measurement of environmental inefficiency from an economic perspective that integrates, in addition to marketed good outputs, the negative environmental externalities associated with bad outputs. We develop our proposal using the latest by- production models that consider two separate and parallel technologies: a standard technology generating good outputs, and a polluting technology for the by-production of bad outputs (Murty et al., 2012). While research into environmental inefficiency incorporating undesirable or bad outputs from a technological perspective is well established, no attempts have been made to extend it to the economic sphere. Our model defines an economic inefficiency measure that accounts for suboptimal behavior in the form of foregone private revenue and social cost excess (environmental damage). We show that economic inefficiency can be consistently decomposed according to technical and allocative criteria, considering the two separate technologies and market prices, respectively. We illustrate the empirical implementation of our approach on a set of established and complementary models using a dataset on agriculture at the level of US states.

Corporate Income Tax as a Genuine Own Resource

This article proposes an original review of the literature on tax competition, and provides new evidence concerning different types of footloose capital: the intensity of strategic interactions is three time stronger for nancial assets than for less mobile capital (e.g. industrial buildings). We also present tax optimization techniques used by Multi-National Firms (MNFs) and document some case studies regarding the foregone tax revenue due to evasion. Amounts saved by rms are comparable to the annual contributions to the EU budget by countries like the UK, Ireland, the Netherlands or Luxembourg. We estimate that the total revenue losses for the EU governments due to corporate tax avoidance amount to almost 100 billion €. After this description of the failure of the current system of taxation, this article analyzes alternative schemes such as the Common Consolidated Corporate Tax Base (CCCTB) and concludes with the outlook of a European corporate income as a genuine own resource for the EU budget.