Negative External Costs Research Articles

Societal sustainable development and long‐run economic growth: How do we stand?

AbstractThe United Nations' 2030 Agenda for Sustainable Development proposes the ambitious goal of an inclusive and sustainable economy. Thus, a realistic assessment of individual countries' possibilities to implement the Sustainable Development Goals might provide helpful insights. We seek to contribute to the existing literature by proposing a working framework for assessing, at the individual country level, the impact of long‐run economic growth on societal sustainable development. The framework is based on composite models from the Structural Equation Modeling‐SEM with a Partial Least Squares Path Modeling (PLS‐PM) estimator. In contrast, societal sustainable development is viewed as emerging from its various dimensions (environmental protection, human development and public health). Based on the analyses of an extended sample of 99 countries, including data for thirty years (from 1990 to 2019), we find that economic growth matters in explaining societal sustainable development, and different countries have benefited unequally from this situation. The key finding reveals that countries aiming to follow the SDGs should recognize their significant disparities and engage in profound structural, institutional, functional and cultural transformations. Thus, a more holistic approach to societal sustainable development is currently needed to enhance government effectiveness as a transmission channel for the impact of growth. In addition, governments need to adjust their economic mechanisms to internalize the costs of environmental degradation and negative externalities for human development and public health.

Fiscal sustainability and the composition of government investment: The case of investment in road infrastructure

Road is the dominant mode of transport, and most investment in road infrastructure is undertaken by governments. Fiscal policy considerations exert therefore a profound impact on the size and quality of road networks. To understand the observed steep downtrends and volatility in road infrastructure investment in Europe since the financial crisis, this paper presents long- and shorter-term panel data analyses of their determinants. The results suggest that investment in road infrastructure is used by governments as an instrument to address fiscal debt sustainability concerns and to smooth out swings in government debt. Investment in road infrastructure also competes with other types of government investment, with a high negative elasticity with respect to investment in health and education. These results are striking in light of the high social cost of congestion, accidents, and other related negative externalities, but their welfare implications are not straight-forward to infer, including as higher road infrastructure investment may only have a limited and variable impact on congestion due to induced travel demand.

Externalities of Pesticides and Their Internalization in the Wheat–Maize Cropping System—A Case Study in China’s Northern Plains

When the production or use of a product imposes a cost or benefit on a third party, this is referred to as an externality. Externalities of pesticides are associated with social and environmental costs. However, there is still a lack of a systematic method for evaluating and internalizing the externalities of pesticides. This study utilizes the pesticide’s environmental impact quotient and environmental accounting methods to assess the external costs associated with pesticide usage in the winter-wheat–summer-maize cropping system in China’s northern plains, with a specific focus on the pesticide use in Botou City during the year 2020 as a case study. Additionally, we introduce the concept of the net external value of pesticides and propose a methodology for its internalization, aiming to quantify the external costs induced by pesticide usage and explore the possibility of integrating them into market transactions. The results showed that the total external costs of pesticide use are 423.9 USD ha−1, with a positive external value of 171.9 USD ha−1 and a net external value of −252.0 USD ha−1. The negative external costs associated with pesticide use outweigh the positive external values. External costs varied significantly according to environmental receptors, after retaining two significant figures: applicators accounted for 45% of the total external costs, followed by pickers (32%), consumers (11%), groundwater (4.5%), fish (3.9%), beneficial insects (1.7%), birds (1.3%), and bees (1.1%). The external costs of maize cultivation were 33% higher than those of wheat cultivation. The application of herbicides resulted in the highest external costs compared with fungicides and insecticides. Based on the internalization of the results, imposing an ecological tax on pesticide users is recommended, with rates of 3.29% for wheat and 6.76% for maize. This research contributes to sustainable agricultural development by providing valuable insights for farmers in selecting environmentally friendly pesticides and informing the implementation of ecological taxes on pesticide usage.

Methods for assessing the impact of PM2.5 concentration on mortality while controlling for socio-economic factors

Even though industrial development has brought vast improvements to our daily lives, it carries with it negative effects such as adverse health outcomes caused by PM2.5 and other pollutants. The negative externalities and external costs might occur when property rights are not properly defined, which means that if no one holds a property right on the atmosphere and the quality of air, there is no appropriate mechanism to prevent a further expansion of negative effects. An economic burden of pollution related to premature morbidity and mortality in individual countries can account for 5–14% of GDP (World Bank, 2021). In 2019, the worldwide health cost of mortality and morbidity caused by exposure to PM2.5 concentration was $8.1 trillion, which is equivalent to 6.1 percent of the global gross domestic product (GDP) (World Bank estimate). Policymakers require evidence-based results that clearly show the impact that air pollution has on the economy and society, in order to be able to establish the proper regulations and ensure their successful implementation. The purpose of this long term study is to provide methods for assessing the negative effects of PM2.5 concentration on PM2.5-related mortality using panel data structure and demonstrate how socio-economic factors affect this relation. This study employed advanced econometric techniques to analyse the long-term impact of PM2.5 on human health, while controlling for socio economic indicators. This study has demonstrated significant effects of socio-economic, health risk and system and governance variables on the relation between PM2.5 ​concentration and PM2.5-related mortality.

A comparative analysis of road and rail freight transport through the Republic of Serbia from the aspect of external costs

Transport causes significant external effects that have a very harmful impact on the environment, human health, but also the economy. The costs of these external effects are not borne directly by those who caused them, but by other road users (congestion, accidents) and society as a whole (environmental pollution costs). This results in making wrong decisions in the transport market, which further leads to an inefficient use of available resources and loss of social welfare. The purpose of this paper is a comparative analysis of negative external costs arising from freight road and rail transport. The main goal of the paper is to quantify the external costs caused by two different modes of freight transport, based on the characteristics of the transport vehicles and the characteristics of the goods being transported, as well as the length of the goods transport. The road and rail freight transport through Serbia will be chosen as the case study.

Фінансово-економічне стимулювання вторинного ресурсокористування в умовах децентралізації: сутність, принципи та регіональний вимір

The article substantiates the expediency of forming a modern system of financial and economic stimulation of the secondary resource use as a necessary prerequisite for activating the processes of utilization of secondary raw materials in the conditions of decentralization. The carried out studies have shown that the financial and economic stimulation of the secondary resource use is a logically ordered set of methods, instruments and levers of fiscal, budgetary, credit, price and reimbursement-penalty influence on the processes of involving the used industrial and household raw materials into economic circulation in order to use the resource value of its material and material substance. It is substantiated that the existing system of financial and economic stimuli for the secondary resource use, which operates at the national level, should receive its modification at the regional and local levels in order to make use of the most of the advantages and opportunities of decentralization in financial and investment support for the modernization of waste management infrastructure and the processes of disposal of the resource value of industrial and household waste. It is determined that the formation of a modern system of financial and economic stimulation of the secondary resource use should be based on a set of fundamental principles and the principles that imply compliance with the requirements of institutional transformations and conjuncture-cyclical fluctuations. It is substantiated that the fundamental principles of forming a system of financial and economic stimulation for the secondary resource use in the context of decentralization are the principles of environmental sustainability, economic efficiency and social responsibility, and the list of principles that provide for compliance with the requirements of institutional transformations and market-cycle fluctuations includes the principles of taking into account global benefits, decentralization and deregulation, adherence to the fiscal optimum, opportunity cost, complexity, prevention and elimination of negative externalities.

A simulation-based study to determine the negative externalities of hyper-local food delivery

• An agent-based simulation is proposed to model hyper-local food delivery service. • The emissions per delivery and parking demand generated are measured for Kolkata. • The average distance traveled per order is 5.85 km. • The average idle time spent by a delivery worker is 59.26% of his working time. • Each delivery can result in the emission of 163.08 gm CO 2 . Hyper-local food delivery involves delivering food from neighborhood eateries by gig workers, mostly using motorized two-wheelers. An accurate assessment of the negative external costs will help decision-makers sustainably regulate such services. As a first step, this research develops an agent-based simulation of a hyper-local food delivery system. Using primary data from Kolkata, India, the simulator estimates the fleet size, the average distance traveled per order, the average number of orders delivered and the average idle time spent by a delivery worker, at varying order volumes. The negative externalities estimated are the emissions per order and the spatio-temporal parking demand generated by the delivery fleet. The results show that at an order volume of 2100, on average, the distance traveled per order is 5.85 km, the orders delivered per worker is 15, the idle time spent is 59.2% and each delivery results in the emission of 163.08 gm CO 2 .

Elektromobilność czynnikiem zmian jakościowych polskiego transportu samochodowego

Transport samochodowy odgrywa obecnie ważną rolę w rozwoju społeczno-gospodarczym kraju. Nie zmienia to faktu, iż należy przeciwdziałać kosztom zewnętrznym transportu samochodowego i brać pod uwagę tę gałąź transportu we wszelkich strategiach zrównoważonego rozwoju. Jedną z możliwości jest wdrożenie na szerszą skalę samochodów elektrycznych w całym parku samochodowym. Infrastruktura i flota pojazdów elektrycznych może być potencjalnym elementem polskiego rynku energii. W artykule przedstawiono aktualne trudności związane z upowszechnianiem elektromobilności transportu samochodowego, które wpływają na niewielką liczbę tego typu pojazdów na rynku. Niski udział samochodów elektrycznych wpływa z kolei na mniejsze możliwości ich wykorzystania jako elementu polskiego rynku energii, przynajmniej w perspektywie najbliższych kilku lat.

Does coal mining benefit local communities in the long run? A sustainability perspective on regional Queensland, Australia

The Bowen Basin in Central Queensland is one of the most active coal mining regions in Australia. Coal mining is highly lucrative and a major contributor to the Australian economy. However, that industry is also responsible for many social and environmental impacts, including air and water pollution, soil erosion, destruction of biodiversity, health-related issues and reduced community cohesion in mining areas. With pressing issues like climate change requiring an energy transition and the danger posed to the Australian economy by an over-reliance on coal exports, the decision to support that industry becomes increasingly questionable. In this study, we compare coal mining, livestock grazing and nature conservation expansion scenarios in the Bowen Basin over a 31-year period. We conduct a hybrid cost-benefit analysis, combining primary data and semi-quantitative weightings constructed from a social impact risk matrix. We estimate the net public benefits of each land use option, and the externalities that they may generate. When solely considering the economic benefits of each scenario, coal mining is by far the better option, generating 10 to 14 times more benefits than grazing and 800 to 3000 times more benefits than nature conservation. However, when including the costs of negative externalities, we find that the net present value of coal mining becomes negative (-$538 to -$690 billion on average), while grazing ($2.84 to $2.85 billion) and nature conservation ($16.35 to $79.29 million) remain positive. Therefore, this study contributes to the much-needed literature that can help demonstrate the many impacts of coal mining and the long-term risks that industry may pose to local communities in regional areas of Australia. • We study coal mining expansion in the Bowen Basin, Central Queensland, Australia. • We compare coal mining, grazing and nature conservation land use scenarios. • A hybrid cost-benefit analysis is conducted, relying on a social impact risk matrix. • Social and environmental impacts of coal mining and grazing are estimated. • Coal mining becomes a less desirable option when externalities are factored in.

The benefit stance: responsible ownership in the twenty-first century

Abstract Ownership in the global equities markets is dominated by large institutions that manage the savings of beneficiaries with long investment horizons. These asset managers rely on incomplete investment models that betray the interests of their beneficiaries and threaten their collective future. The models encourage individual companies to compete without regard for health of the critical social and environmental systems that support the long-term value of those beneficiaries’ diversified portfolios and lived experience. These naïve models ignore the growing cost of profit-driven negative externalities. This article examines the latest models of benefit corporation law, a new form of governance that overturns the rule of shareholder primacy, and argues that their principles should be expanded to cover the entire chain of investing, from savers to funds to asset managers and finally to the real economy.

Health, environmental and travel cost impacts of urban cycling in Dublin, Ireland

Cycling as a mode of transport avoids the negative external costs of driving such as air pollution, carbon dioxide emissions and noise and can also reduce the public health costs associated with physical inactivity. However, increased cycling may also have disadvantages such as increased exposure to air pollution and risk of traffic collisions. A number of studies have developed methods to quantify these health and environmental impacts and have shown that the overall impact of increased cycling is positive. However, while minimising travel costs is traditionally the main objective of transport planners, these studies have not included travel cost impacts in their analyses. In this study, the impacts of a modal shift towards cycling are quantified, taking into account health, environmental and travel cost impacts. It was found that the health and environmental impacts of increased cycling in Dublin, Ireland, would be strongly positive, mainly due to the health benefits of physical activity. When travel costs are also included in the analysis, the central estimate of net impact remains positive but the uncertainty increases considerably. This underscores the importance of the transport and health sectors working together to maximise the social welfare resulting from transport projects.

The Benefit Stance: Responsible Ownership in the Twenty-First Century

Ownership in the global equities markets is dominated by large institutions that manage the savings of beneficiaries with long investment horizons. These asset managers rely on incomplete investment models that betray the interests of their beneficiaries and threaten their collective future. The models encourage individual companies to compete without regard for health of the critical social and environmental systems that support the long-term value of those beneficiaries’ diversified portfolios and lived experience. These naive models ignore the growing cost of profit-driven negative externalities. This article examines the latest models of benefit corporation law, a new form of governance that overturns the rule of shareholder primacy, and argues that their principles should be expanded to cover the entire chain of investing, from savers to funds to asset managers and finally to the real economy.

Economic Growth and Negative Externalities in India

This study attempts to assess and compare the extent of negative externalities in three income groups of countries: high, middle and low, and also India. It also aims at analyzing the relationship between negative externalities and growth of Gross National Income (GNI) in India. The study finds that low-income countries generate higher negative externalities. Further, in terms of Genuine Saving Rate (GSR), low-income countries are on an unsustainable path since they have negative GSR, suggesting that investment in physical and human capital is not sufficient to offset the costs of negative externalities. On the other hand, both high income and middle-income countries are on a sustainable growth path. The paper finds that the economic growth of India is more sustainable in terms of GSR as compared to all income categories countries. Further, the analysis detected a bidirectional relationship between negative externalities and GNI growth in India in the pre-1990s. However, in the post-1990s, whereas, economic growth is positively influencing negative externalities, negative externalities do not seem to be influencing economic growth suggesting that the impact of negative externalities on growth is neutralized by investment in physical and human capital.

The Evolution of Business Groups’ Corporate Social Responsibility

In this theoretical paper, I analyze business groups’ corporate social responsibility (CSR). Building on economic thinking, I propose that the level and diversity of CSR investments of business groups evolve with the development of the country, as a result of the interaction of two drivers: the level of infrastructure deficiencies and the cost of negative externalities. I argue that in underdeveloped countries, business groups have high levels and low diversity of CSR investments, focusing on the social arena to compensate for infrastructure deficiencies. As countries implement pro-market reforms and become emerging economies, the level of CSR investments diminishes as business groups can rely on external providers and the government for supporting infrastructure, but CSR diversity increases to address the growing costs of negative externalities in the environmental and economic arenas. As countries further develop to become advanced economies, business groups’ level and diversity of CSR investments increase to prevent the high costs of negative externalities in the social, environmental, and economic arenas proactively.

Indicators of sustainability to assess aquaculture systems

Aquaculture is one of the fastest-growing food-producing sectors worldwide, making it desirable to assess the sustainability of aquaculture systems. The objective of this study was to develop a portfolio of quantitative indicators of economic, environmental and social sustainability to assess different aquaculture systems. The indicators were developed from 2003 to 2016, combining top-down and bottom-up methods, together with practical observations in experimental and commercial aquaculture facilities. A total of 56 economic (14), environmental (22) and social (20) indicators are proposed. Economic sustainability indicators reveal the degree of efficiency in using financial resources, the economic feasibility, resilience, and the capacity to absorb negative external costs and to generate funds for reinvestment. Environmental indicators reflect the use of natural resources, the efficiency in using resources, the release of pollutants and unused byproducts, and the risk of reducing biodiversity. Social sustainability indicators reflect the capacity to generate benefits for local communities, including jobs and food security, equitable income distribution, equality of opportunity, and inclusion of vulnerable populations. The indicators thus developed can be used on farm, regional, global or sectorial scales. They are quantitative, broad, scientifically sound, easy to understand and interpret, feasible to obtain on farms or on research stations, and permit comparison at different scales of space and time. Thus, they can be used to assess production systems and to compare different experimental treatments in research experiments. They also can be used by certifying organizations, investors, and policymakers. They allow performing diagnostics, identifying strengths and weaknesses, setting goals and determining actions, and assessing the effectiveness of actions and public policies.

The Impact of Obesity on Medical Care Costs and Labor Market Outcomes in the US

The prevalence of obesity has risen dramatically in most countries of the world, and the economic consequences of obesity are not well understood. We analyzed data from the Medical Expenditure Panel Survey (MEPS) for 2001-2015 and estimated the percentage of healthcare costs that were associated with adult obesity, both for the US as a whole and for the most populous states. We also reviewed the literature on the impact of obesity on economic outcomes such as medical care costs, employment, and wages. The percent of US national medical expenditures devoted to treating obesity-related illness in adults rose from 6.13% in 2001 to 7.91% in 2015, an increase of 29%. Substantial differences existed across states; in 2015, some states (AZ, CA, FL, NY) devoted 5%-6% of medical expenditures to obesity, whereas others (NC, OH, WI) spent >12% of all healthcare dollars on obesity. A review of previous literature that exploited natural experiments to estimate causal effects found that obesity raises medical care costs and lowers wages and the probability of employment. A substantial and rising percentage of healthcare costs are associated with obesity. This is true for the US, for individual states, for each category of expenditure, and for each type of payer. Previous literature generally found that obesity worsens economic outcomes, such as medical care costs, wages, and employment, and imposes negative external costs that may justify government intervention.

The Evolution of Business Groups’ Corporate Social Responsibility

I analyze business groups’ corporate social responsibility (CSR). Building on economic thinking, I propose that the diversity of CSR activities of business groups evolves with the level of development of the country, as the result of the interaction of two influences: the level of infrastructure deficiencies and the cost of negative externalities. Thus, I argue that in underdeveloped countries, business groups have higher levels of diversity of CSR activities, especially in the social arena, to compensate for infrastructure deficiencies. As countries implement pro-market reforms and become emerging economies, business groups’ CSR diversity diminishes as they are able to rely on external providers and the government for supporting infrastructure. As countries further grow to become advanced economies, business groups CSR diversity increase to ameliorate the increasing cost of negative externalities. I further explain how firm, industry and country characteristics modify these relationships.

Let Tiebout pick up the tab: Pricing out externalities with free mobility

AbstractFree mobility has not been thought of as an effective tool to correct over‐ or underproduction of externalities. In this paper, we establish that foot voting can internalize the cost of negative externalities. Workers have to accept the wage and rent, however high or low these values are in equilibrium, if they cannot relocate. In reality, workers are mobile and they can effectively influence the equilibrium wage and rent to reflect the externalities by threatening to walk away if the current externalities are at an intolerable level. In an economy with free mobility, firms indirectly pay for the damage in the form of an increased labor or land cost and thus the externalities are partially internalized. We specify the condition under which a mobile economy is efficient in the presence of externalities, and discuss potential policy implications of our findings.

Workshop 3 report: Sustainable funding sources and related cost benefit measurements

Recognising that public transport services generally deliver substantial benefits for society but frequently require operating and capital funding support, this Workshop sought to find ways to bridge this benefit/funding gap, particularly through benefit monetization. It elaborated a wide range of benefits from public transport services, to both users and non-users. In regard to non-users, there was a particular focus on the role of public transport in promoting positive external benefits, such as agglomeration economies, and reducing the negative external costs of car use. A number of ways in which the service funding requirement might be reduced by improved system management were considered, such as better fare evasion practices and more effective public private partnerships. A range of funding opportunities was then reviewed, from which two preferred bundles were developed. Value capture was seen as a vital funding opportunity, both for supporting operating funding and capital funding requirements. Funding circumstances that were seen as more properly a governmental responsibility were identified.

Air pollution, economic spillovers, and urban growth in China

This paper empirically tests the interactive effects of air pollution and economic spillovers in Chinese cities from 2003 to 2010. The results show that Chinese cities benefit from the economic spillovers from surrounding cities, but bear the costs of negative air pollution externalities created by neighboring cities. We use wind direction and the administrative boundaries of provinces to disentangle possible multicollinearity between air pollution emissions and economic spillovers across cities. However, the results could not reject the growth-restricting effects of air pollution from neighboring cities. The results imply that the development of a city surrounded by polluters is likely to be constrained.