Potential Negative Externalities Research Articles

Consultation, Participation and Policy‐Making: Evaluating Australia's Renewable Energy Target

A Review of Australia's Renewable Energy Target is used to contribute to the concept of negative externalities in consultation processes, including wasted investment by stakeholders and reduced investor confidence. The findings indicate that there is a need to establish clear consultation objectives. The paper concludes with a model for consultation agents to consider when initiating a consultation process. The model stresses the need to make objectives of the consultation process transparent to stakeholders, including the extent to which the outcomes of consultation are likely to result in changes to policy. Consultation agents and policy developers should seek to identify potential negative externalities at the outset of any consultation process, and address these within the consultation framework where possible.

Governance of the Single Supervisory Mechanism: Some Reflections

Since the inception of the Euro, European policy makers have been increasingly recognizing the ‘efficiency’ gaps in EU financial supervision against a background of a decentralized institutional architecture for re gulation, supervision and financial stability. Recognition of this gap had led to tangible efforts to capture some of the potential efficiency gains through legally binding mechanisms and policy coordination mechanisms (i.e. European System of Financial Supervisors –ESFS-). That ongoing iterative process of cooperation and coordination can be interpreted as having already internalized some of the EU´s potential negative externalities of cross border banking (Nieto and Schinasi, 2007). Nonetheless, the first global financial crisis since the Euro´s inception has highlighted the limitations of the decentralized approach not only for prudential supervision but also for bank resolution and its financing. In the face of the twin banking and sovereign crisis in some Euro area countries, heads of state government representatives agreed on the Single Supervisory Mechanism (SSM) involving the European Central Bank (ECB) for banks in

Sustainability, self-reliance and aloha aina: the case of Molokai, Hawai’i

A growing body of academic and popular literature associates localized systems of production and consumption with improved sustainability. However, there is a need for research that systematically addresses whether and how re-localization of an economy makes it sustainable, and under what conditions such regional self-sufficiency is possible. In the state of Hawai’i, there is growing momentum to create greater energy and food self-reliance throughout the islands as a means to achieve greater sustainability. Nowhere is this sentiment stronger than on the island of Molokai, frequently called the ‘last Hawaiian Island.’ On Molokai, the discourse of sustainability is interpreted through the lens of aloha aina, or love for the land, and an associated desire for stewardship of resources so that island residents can be as self-reliant as possible. This paper presents two recent examples from Molokai to illustrate some of the complexities associated with regional self-sufficiency on an island unavoidably buffeted by state, national and global socio-political and economic forces. Self-reliance in food on Molokai in fact requires greater collaboration with, as opposed to isolationism from, the central state. Conflicts arise when efforts to promote island sustainability are at odds with initiatives for sustainability at a broader organizational level – in this case, at the state level. The Hawai’i case raises broader questions about the viability of regional-focused sustainability initiatives that underestimate the degree to which their resource management systems are deeply interconnected to larger-scale state, national or global systems and that overlook the potential negative externalities of their efforts.

Do Homeowners Associations Mitigate or Aggravate Negative Spillovers from Neighboring Homeowner Distress?

Experiences reveal that the monitoring costs of the foreclosure crisis may be non-trivial, and smaller governments may have more success at addressing potential negative externalities. One highly localized form of government is a homeowners’ association (HOA). HOAs could be well suited for triaging foreclosures, as they may detect delinquencies and looming defaults through direct observation or missed dues. On the other hand, the reliance on dues may leave HOAs particularly vulnerable to members’ foreclosure. We examine how property prices respond to homeowner distress and foreclosure within HOA communities in Florida. We combine datasets of HOAs, sales and aggregate loan delinquency and foreclosures from 2000 through 2008. We find properties in HOAs are relatively less impacted by more distressed neighbor homes compared to non-HOA properties, but only when considering less severe delinquency rates. We also find that negative price effects from higher delinquency exposure rates are ameliorated for properties in larger and newer HOAs.

Do homeowners associations mitigate or aggravate negative spillovers from neighboring homeowner distress?

Experiences reveal that the monitoring costs of the foreclosure crisis may be non-trivial, and smaller governments may have more success at addressing potential negative externalities. One highly localized form of government is a homeowners’ association (HOA). HOAs could be well suited for triaging foreclosures, as they may detect delinquencies and looming defaults through direct observation or missed dues. On the other hand, the reliance on dues may leave HOAs particularly vulnerable to members’ foreclosure. We examine how property prices respond to homeowner distress and foreclosure within HOA communities in Florida. We combine datasets of HOAs, sales and aggregate loan delinquency and foreclosures from 2000 through 2008. We find properties in HOAs are relatively less impacted by more distressed neighbor homes compared to non-HOA properties, but only when considering less severe delinquency rates. We also find that negative price effects from higher delinquency exposure rates are ameliorated for properties in larger and newer HOAs.

Do Affordable Housing Projects Harm Suburban Communities? Crime, Property Values, and Taxes in Mount Laurel, NJ

This paper offers a mixed-method analysis of the municipal-level consequences of an affordable housing development built in suburban New Jersey. Opponents of affordable housing development often suggest that creating affordable housing will harm surrounding communities. Feared consequences include increases in crime, declining property values, and rising taxes. To evaluate these claims, the paper uses the case of Mt. Laurel, NJ - the site of a landmark affordable housing legal case and subsequent affordable housing development. Employing a multiple time series group control design, we compare crime rates, property values, and property taxes in Mt. Laurel to outcomes in similar nearby municipalities that do not contain comparable affordable housing developments. We find that the opening of the affordable housing development was not associated with trends in crime, property values, or taxes, and discuss management practices and design features that may have mitigated potential negative externalities.

Cruise Tourism Externalities and Residents’ Support: A Mixed Approach

Abstract This paper investigates residents’ preferences of investment in cruise tourism, taking its externalities into full account. The research involved data collection in the port of call of Messina (Sicily, Italy), during the peak cruise season in 2011. A mixed generalized ordered logit analysis, based upon a correspondence analysis, is run to examine what factors influence residents’ perceptions about investing in cruise tourism. Potential positive and negative externalities produced by this economic activity, as well as socio-demographic and economic determinants are taken into account. Overall, residents in Messina, treated as a composite stakeholder, would invest a very high level of resources in cruising if their income depends on the cruise activity, if they had a cruise trip in the past, if they belong to a family with a high number of components, and if they believe this activity to exert positive welfare, cultural and social externalities. Conversely, residents in Messina are likely to prefer a low, or very low level of investment the farther they live from the port, if they are female, retired and if they perceive a deterioration of the environment. Implications for policy makers are drawn from these empirical findings.

Merchant electricity transmission expansion: A European case study

Abstract We apply a merchant transmission model to the trilateral market coupling (TLC) arrangement among the Netherlands, Belgium and France as an example, and note that it could further be applied to other market splitting or coupling of Europe’s different national power markets. In this merchant framework the system operator allocates financial transmission rights (FTRs) to investors in transmission expansion based upon their preferences, and revenue adequacy. The independent system operator (ISO) preserves some proxy FTRs to manage potential negative externalities that may result from expansion projects. This scheme could help European market coupling arrangements attract additional investment.

EXTERNALITIES AND THE SIX FACETS MODEL OF TECHNOLOGY MANAGEMENT: GENETICALLY MODIFIED ORGANISMS IN AGRIBUSINESS

The Six Facets Model of technology management has previously only been applied to process innovation at the firm and the industry level. In this article, the model is applied to product innovation for the first time. In the context of genetically-modified organisms in the agribusiness industry, we examine radical product innovation through the Six Facets Model. We propose, based on the history of genetically-modified organisms in agribusiness, that when applied to product innovation the Six Facets Model will benefit considerably from the inclusion of potential negative externalities and the reactions of external stakeholders.

How Riskless is 'Riskless' Arbitrage?

In this paper, we challenge the notion that exploiting “riskless” arbitrage is riskless. We show that if rational agents face uncertainty about completing their arbitrage portfolios, then arbitrage is limited even in markets with perfect substitutes and convertibility. We call this phenomenon “execution risk” in arbitrage exploitation. Using a simple model, we demonstrate that this risk arises from the crowding effect of competing arbitrageurs entering the same trade and inflicting negative externalities on each other. We argue that the cost of illiquidity and holding inventory are potential negative externalities. Our empirical results provide evidence that support the relevance of execution risk in arbitrage.

Merchant Electricity Transmission Expansion: A European Case Study

We apply a merchant transmission model to the trilateral market coupling (TLC) arrangement among the Netherlands, Belgium and France as a generic example, and note that it can be applied to any general market splitting or coupling of Europe's different national power markets. In this merchant framework; the system operator allocates financial transmission rights (FTRs) to investors in transmission expansion based upon their preferences, and revenue adequacy. The independent system operator (ISO) preserves some proxy FTRs to deal with potential negative externalities due to an expansion project. This scheme proves to be capable in providing incentives for investment in transmission expansion projects within TLC areas.

Green vs. green: Measuring the compensation required to site electrical generation windmills in a viewshed

Proponents of wind power note that wind is a green energy source. Yet locating electrical generating windmills has become difficult in some localities because of potential negative externalities. We address why the NIMBY syndrome may arise when choosing site locations by addressing the perceived property rights of a viewshed, the role of compensation in a NIMBY impasse, and how concerns for the environment might lessen the compensation required. We use a willingness to accept framework to measure the compensation required to allow wind generation windmills to be built in the mountains of North Carolina. We find that individuals who perceive wind energy as a clean source of power require less compensation. Those who retire to the mountains or individuals who have ancestors from Watauga County require more compensation to accept windmills in their viewshed. In addition, we find in a bivariate-probit analysis that individuals who are more likely to participate in a green energy program are also more likely to allow electrical generation windmills in their viewshed, suggesting that the green vs. green environmental debate is overstated.

Consumer Benefits of Labels and Bans on GM Foods—Choice Experiments with Swedish Consumers

The European Union has been relatively cautious about using biotechnology in food production. A label regime combined with the right of individual member states to ban introduction of new genetically modified (GM) strains means that GM food products in effect are banned in many countries. We show how it is possible to empirically test whether a ban can be motivated by reference to potential negative externalities. This is followed up by results from a choice experiment. We cannot reject the hypothesis of equal WTP for a ban and a labeling scheme.

The role of trees for sustainable management of less-favored lands: the case of eucalyptus in Ethiopia

In northern Ethiopia, eucalyptus is the most commonly observed tree species in community and household woodlots. In an environment suffering from biomass and water shortages, erosion and land degradation, fast growing and resilient eucalyptus perform better than most indigenous tree species. Smallholders show a clear preference for eucalyptus poles, which are useful for farm implements and constructing dwellings and fences. In addition, the sale of eucalyptus poles and products has the potential to raise farm incomes, reduce poverty, increase food security and diversify smallholder-farming systems in less-favored areas of Tigray. Despite the potential for eucalyptus to improve rural livelihoods, in 1997 the regional government of Tigray imposed a ban on eucalyptus tree planting on farmlands. The ban was precipitated by concerns about the potential negative environmental externalities associated with eucalyptus, and the desire to reserve farmland for crop production. However, the regional government promotes the planting of eucalyptus in community woodlots, and has recently begun to allow private planting of eucalyptus on community wasteland and steep hillsides. In this paper, we review the ecological debate surrounding the planting of eucalyptus trees. In addition, the economic factors that influence smallholders to invest in tree production are considered. Ex ante benefit–cost analysis based on community and village level survey data from Tigray illustrates that planting eucalyptus yields high rates of return, well above 20% in most circumstances. The effect of variable harvest rates, and the potential costs of decreased crop production when eucalyptus trees are planted on or near farmlands are considered relative to our base case scenario. Based upon the review of the ecological and economic impacts of eucalyptus, we conclude that a policy option favoring the allocation of wastelands for private tree planting offers the greatest opportunity for rural smallholders.

Why Not NIMBY? Reputation, Neighbourhood Organisations and Zoning Boards in a US Midwestern City

In US municipalities, petitions for exception to the zoning code are thought to elicit 'not in my backyard' or 'nimby' responses from neighbourhood organisations concerned about potential negative externalities. This paper brings qualitative and quantitative data to bear on a theory arguing that municipal zoning boards provide incentives over time for neighbourhood organisations to come to consensus with developers. The findings suggest that neighbourhood organisations have greater success influencing zoning boards to deny zoning exception petitions after establishing reputations for coming to agreement with developers in the past. Further, neighbourhood groups that choose more oppositional strategies tend to face more noxious zoning petitions in the neighbourhood in the future.

Why Not NIMBY? Reputation, Neighbourhood Organisations and Zoning Boards in a US Midwestern City

In US municipalities, petitions for exception to the zoning code are thought to elicit 'not in my backyard' or 'nimby' responses from neighbourhood organisations concerned about potential negative externalities. This paper brings qualitative and quantitative data to bear on a theory arguing that municipal zoning boards provide incentives over time for neighbourhood organisations to come to consensus with developers. The findings suggest that neighbourhood organisations have greater success influencing zoning boards to deny zoning exception petitions after establishing reputations for coming to agreement with developers in the past. Further, neighbourhood groups that choose more oppositional strategies tend to face more noxious zoning petitions in the neighbourhood in the future.

The maastricht fiscal criteria: Required but ineffective?

The paper investigates the rationale for, and the effectiveness of the fiscal criteria in the Maastricht treaty against the background of two questions: What are the incentives for an unsound fiscal policy in EMU, and what are the (potential) negative externalities if such a policy were to occur. The paper argues that EMU creates both incentives for a higher fiscal deficit while respecting solvency, and incentives for not rectifying a potentially unsustainable debt level once one is a member. Unsound fiscal policy could trigger important negative extermalities for the other member countries. The paper concludes that the current fiscal provisions of the Maastricht treaty are not sufficiently well defined and the envisaged sanctions not strong enough to enforce a disciplined fiscal stance. This leads to proposals of supplementary measures for surveillance and alternative sanctions. Staying within the framework of the Maastricht treaty, it is strongly suggested that both debt and deficit criteria should be strictly surveyed, but in view of their conceptual and operational deficiencies they should be supplemented by additional indicators. Based on this broader measurement concept, it is proposed to use semi-automatic and market-led sanctions to enforce a disciplined fiscal stance.

The Problem of Social Cost

The Problem of Social Cost