Private Benefits Research Articles

Vaccination equilibrium: Externality and efficiency

I study individual consumers’ choices of getting vaccinated. A vaccine reduces the severity of an infectious illness, but may produce side-effects and other disutilities at the time of administration. Such private benefits and disutilities vary across consumers in the population. The infection probability depends negatively on the total mass of vaccinated consumers. This is an externality. One consumer’s vaccination choice has negligible contribution to the total mass of vaccinated consumers. Consumers do not internalize the externality. I characterize a unique Vaccination Equilibrium, the sustainable vaccination mass resulting from individual decisions. I show how vaccine improvements in benefits, side-effects, and infection likelihood change the Vaccination Equilibrium. The first-best or efficient vaccination mass takes into account the externality and consumers’ benefits and costs. The unique Vaccination Equilibrium is never first best. Taxes, subsidies, and mandates may change the Vaccination Equilibrium.

Impact of Ownership Structure and Dividends on Firm Risk and Market Liquidity

This article examines the impact of ownership structure and dividend payouts on idiosyncratic risk and market liquidity using agency, signaling, and bankruptcy theories from an emerging market perspective. The evidence shows that family firms dominate and have concentrated ownership, and dividend payouts are lower among family firms than their counterparts. The idiosyncratic risk is high among firms with higher family ownership concentration. The family ownership concentration and control positively influence the (firm) risk, dividends positively affect the market liquidity, and risk relates negatively to the market liquidity, supporting the entrenchment of the minority shareholders’ proposition that a significant payout leads to a decrease in information asymmetry and a lower level of risk. The study further supports the proposition that information asymmetries are central to elucidating the dynamics of dividend payouts and their effects on firm risk and market liquidity. The evidence confirms that family ownership concentration affects policy decisions, especially ownership control. The paper’s originality lies in factoring ownership concentration when analyzing how payouts affect firm risk and market liquidity from an emerging markets perspective where controlling shareholders enjoy substantial private benefits, whereas minority shareholders have limited protection.

Vaccination as personal public-good provision

Vaccination against infectious diseases has both private and public benefits. We study whether social preferences – concerns for the well-being of other people – are associated with one’s decision regarding vaccination. We measure these social preferences for 549 online subjects with a public-good game and an altruism game. To the extent that one gets vaccinated out of concern for the health of others, contribution in the public-good game is analogous to an individual’s decision to obtain vaccination, while our altruism game provides a different measure of altruism, equity, and efficiency concerns. We proxy vaccine demand with how quickly a representative individual voluntarily took the initial vaccination for COVID-19 (after the vaccine was widely available). We collect COVID-19 vaccination history separately from the games to avoid experimenter-demand effects. We find a strong result: Contribution in the public-good game is associated with greater demand to voluntarily receive a first dose, and thus also to vaccinate earlier. Compared to a subject who contributes nothing, one who contributes the maximum ($4) is 58% more likely to obtain a first dose voluntarily in the four-month period that we study (April through August 2021). In short, people who are more pro-social are more likely to take a voluntary COVID-19 vaccination. Behavior in our altruism game does not predict vaccination. We recommend further research on the use of pro-social preferences to help motivate individuals to vaccinate for other transmissible diseases, such as the flu and HPV.

Controlling shareholders and sustainable corporate governance: The role of dual-class shares

Abstract Low-carbon innovation is necessary to overcome the delay of governments in implementing the Paris agreement. However, large institutional investors only engage in climate risk management. They cannot commit to low-carbon innovation because that is fundamentally uncertain, short-term unprofitable, and their index-tracking strategy is incompatible with screening firm-specific breakthroughs. To pursue sustainable corporate governance, institutional investors should rather tie their hands with controlling shareholders. Controlling shareholders can contribute their entrepreneurial vision to low-carbon innovation while institutional investors allow them to scale this vision. This article argues that institutional investors catering to the preferences of climate-conscious beneficiaries should finance controlling shareholders through conditional dual-class shares. Dual-class shares allow relaxing the financial conditions for control. To fulfil their mandate from climate-conscious beneficiaries, institutional investors can outcompete short-term profit-seeking investors by offering controlling shareholders a higher wedge between voting rights and economic interest and the possibility to cash in higher idiosyncratic private benefits of control, if successful, conditional on engaging in low-carbon innovation. Having at stake welfare-increasing private benefits of control, as well as all or most of their wealth, controlling shareholders are incentivized to discover low-carbon breakthroughs or to acknowledge failure to do so. Corporate law should facilitate contracting between controlling shareholders and institutional investors to support this incentive. Target-contingent transfer sunsets should allow cashing in control premiums only if the low-carbon innovation succeeds. Divestment sunsets and other contractual safeguards should prevent controlling shareholders from increasing agency cost, without undermining equity capital raising. Dual-class recapitalizations should be allowed with a majority-of-minority vote.

Nature based solutions in cities of the global South—The ‘where, who and how’ of implementation

Nature-based solutions have gained popularity as an approach to reduce the impacts of climate and environmental change, providing multi-fold and multi-sectoral benefits especially in cities. Yet there has been growing concern about their utility for cities of the Global South, a concern fuelled by the paucity of studies, including scientific peer reviewed and gray literature. In this paper, we contribute to this knowledge gap, based on an analysis of 120 case studies of NBS in Global South cities, documented in two databases (Urban Natural Atlas and Oppla). These cases fall largely under categories of blue and green infrastructure, with a few cases also focusing on grey infrastructure (in buildings or campuses). While most cases are in Asia, several have also been documented in Africa and Central/South America. Two-third of documented NBS cases are aligned towards either national, or lower-level (regional and local) policies indicating the importance of policy mechanisms for driving their implementation. Institutional arrangements are usually non-government, government or collaborative arrangements, with the goal of climate resilience, biodiversity support and ecosystem restoration—along with social goals of creating public spaces. However, when private players take on the mandate for NBS, they focus primarily on grey infrastructure (in buildings and campuses), primarily meant for private or employee benefits, and not for the public. In cases where public engagement is a stated priority, we find tokenistic approaches deployed, primarily seeking engagement through information dissemination and consultation predominate. Despite the stated importance for participation and engagement, only a few cases focused on empowerment and co-creation of NBS with local communities. We suggest that there is a greater need for documentation regarding the modes of participation especially on roles and levels of actors involved, to enrich our understanding of the impact of NBS on values of justice and equity in the cities of the global South.

Trustees of (Public) Reservations? U.S. Land Trusts and Neoliberalism as Bricolage

Land trusts are increasingly powerful institutions of U.S. environmental governance that deserve more critical scrutiny. As charitable conservation organizations, they enjoy the many advantages of nonprofit status under the claim that they provide broad public benefits. Critics, however, have recently challenged this claim, portraying land trusts as quintessential institutions of neoliberal privatization and hybrid governance. Through a conjunctural analysis of U.S. land trusts across the long twentieth century, and with specific attention to the first, the Trustees of Public Reservations (founded in 1893), this article argues that the treatment of land trusts as neoliberal institutions is both illuminating and limiting. As many critical analyses indicate, U.S. land trusts today tend to privatize governance and facilitate the use of public funds for projects with significant private benefit. I argue, however, that the conceptualization of land trusts as institutions of neoliberal environmental governance also obscures the fact that, across their long history, they are an expression of the contradictions of decentralized land-use planning under capitalism. Most broadly, I suggest that rigorous conjunctural analysis can help geographers refine their conceptualization of neoliberalism and move beyond its limits.

Privatisation and government spending efficiency: An empirical analysis in Europe

AbstractAcademic literature has made an effort to demonstrate the positive effects of privatisation reforms on government performance and economic growth. However, there is no sufficient evidence to support the benefits of privatisation in terms of government spending efficiency. This study analyses the correlation between privatisation and government spending efficiency. Our empirical results do not support a positive effect of privatisation on government spending efficiency. These findings are relevant because they suggest that, although privatisation has been usually seen as a tool to balance public finances, it does not mean that government spending efficiency will be higher after privatising State‐owned enterprises.

Post-colonial contexts, the state, and education reform: a framework for understanding the ethos of privatization

The central argument of this article is that post-colonial states operate—and have always operated, due to their roots in colonialism and capitalism—according to an “ethos of privatization,” through which state agents derive private benefit from positions ostensibly responsible for providing public services. The article offers a framework for understanding the ethos of privatization as central to state behavior that is based on insights from literatures in four areas: global education policy, political economy, world systems theory, and post-colonial studies. The article demonstrates the theoretical and methodological value of this framework for producing critical public policy knowledge by applying it to the case of educational privatization in Honduras. The article concludes with a discussion of the benefits of this framework, particularly vis-à-vis more established approaches rooted in the policy sociology literature.

The Political Economy of NORAD

ABSTRACT This introductory article provides an overview of the North American Aerospace Defense Command (NORAD) as well as the contents of this special issue. NORAD is one of the oldest bi-national defence agreements in the world but the economics assessment of it remains scant. This special issue is one attempt to address this oversight. The articles in this special issue focus on the economic aspects of NORAD and its modernization. They delve into economic theories of alliances, burden sharing, potential private benefits of modernization, public choice theory and the impact on local communities and industries. By focusing on the political economy of NORAD, this introductory article underscores the importance of NORAD in the face of evolving threats and calls for greater attention from defense economists to address the complex economic and strategic dynamics involved.

The Benefits and Costs of Employee Stock Ownership Plans in China

ABSTRACTResearch IssueWe investigate the deliberations of controlling shareholders in assessing the trade‐offs between costs and benefits preceding the adoption of an Employee Stock Ownership Plan (ESOP). Furthermore, we explore the market responses to ESOP announcements and their associations with the private benefits of control. Moreover, our study delves into the modifications in private benefits of control, changes in employment dynamics, and subsequent operating performance subsequent to the implementation of ESOPs.Research InsightsWe conduct our research employing a comprehensive dataset encompassing the adoptions of ESOPs within publicly listed Chinese companies during the period spanning from 2014 to 2020. Our empirical findings reveal that firms characterized by diminished private benefits of control, as indicated by a reduced wedge between control rights and cash flow rights, as well as a lower frequency of related party transactions, are more inclined to consider the adoption of ESOPs, especially when the potential for productivity gains is substantial. These firms also elicit more positive market reactions upon the announcement of their ESOP initiatives. While ESOPs do lead to heightened productivity, the overall enhancement in operating performance remains relatively modest due to the significant cost burden imposed on shareholders by the large unearned employee compensation. Our results suggest that controlling shareholders who partake in fewer private benefits of control are more inclined to forego these entitlements in favor of embracing ESOPs as a strategic mechanism for realizing productivity gains. However, it is imperative to acknowledge that such gains may be considerably offset by substantial increases in employee compensation expenses. Despite the prevalence of short‐lived features in Chinese practice, we lack substantial evidence supporting their inhibitory effects on the increased monitoring and productivity following ESOP adoption.Academic ImplicationsThis study provides a comprehensive examination of recent ESOPs in the Chinese context, offering insights into the regulatory complexities within the largest emerging market. The research contributes to the existing literature by unveiling the intricate relationship between private benefits of control and the decision to adopt ESOPs, as well as their subsequent implications. Notably, our findings, particularly the observed neutral impact on operating performance, augment the ongoing discourse surrounding the efficacy of ESOPs in augmenting shareholder value.Policy ImplicationsThis research introduces ESOPs as an innovative mechanism for mitigating private benefits of control, particularly in the context of emerging markets where controlling shareholders tend to accrue significant private benefits of control. The incorporation of performance‐related criteria within the ESOP framework serves as a means to effectively manage the additional compensation associated with these plans, thereby enhancing their overall efficacy.

Social equity in international environmental agreements

The aim of this paper is to investigate the problem of designing and building International Environmental Agreements (IEAs) taking into account some normative properties. We consider n asymmetric countries of the world, each one generating a quantity of pollutant emissions from the production of goods and services. We assume that individual emissions yield private benefits and negative externalities affecting all countries. To determine its own level of pollution, each state conducts a cost-benefit analysis. The absence of a supranational entity imposing emissions reduction makes IEAs based on voluntary participation. Examining the standard static non-cooperative game-theoretical model of coalition formation, we discover that the resulting emissions allocations might not be equitable à la Foley. It means that there might exist at least one player preferring to implement some other agent’s strategic plan instead of to play her own strategy. With the goal of studying whether equity, at least among coalesced countries, may be a criterion leading to social improvement, we introduce a new optimization rule. We require that members of an environmental coalition have to solve the maximization problem subject to the constraint imposing that they do not envy each other. Analyzing the particular case of two-player games, we get that, when countries are, in a sense, not too different from each other, our new mechanism endogenously induces social equity. By imposing a suitable total emission cap, the same results extend to all those games where our and standard solutions coexist and are different.

Privatisation of government services in Australia: what is known about health and equity impacts

BackgroundHistorically in Australia, all levels of government created collective wealth by owning and operating infrastructure, and managing natural assets, key public goods and essential services while being answerable to the public. This strong state tradition was challenged in the 1980s when privatisation became a widespread government approach globally. Privatisation involves displacing the public sector through modes of financing, ownership, management and product or service delivery. The Australian literature shows that negative effects from privatisation are not spread equitably, and the health and equity impacts appear to be under-researched. This narrative overview aims to address a gap in the literature by answering research questions on what evidence exists for positive and negative outcomes of privatisation; how well societal impacts are evaluated, and the implications for health and equity.MethodsDatabase and grey literature were searched by keywords, with inclusion criteria of items limited to Australia, published between 1990 and 2022, relating to any industry or government sector, including an evaluative aspect, or identifying positive or negative aspects from privatisation, contracting out, or outsourcing. Thematic analysis was aided by NVivo qualitative data software and guided by an a-priori coding frame.ResultsNo items explicitly reflected on the relationship between privatisation and health. Main themes identified were the public cost of privatisation, loss of government control and expertise, lack of accountability and transparency, constraints to accessing social determinants of health, and benefits accruing to the private sector.DiscussionOur results supported the view that privatisation is more than asset-stripping the public sector. It is a comprehensive strategy for restructuring public services in the interests of capital, with privatisation therefore both a political and commercial determinant of health. There is growing discussion on the need for re-nationalisation of certain public assets, including by the Victorian government.ConclusionPrivatisation of public services is likely to have had an adverse impact on population health and contributed to the increase in inequities. This review suggests that there is little evidence for the benefits of privatisation, with a need for greater attention to political and commercial determinants of health in policy formation and in research.

Unbundling tenure security and demand for property rights: Evidence from urban Tanzania

Rapid urbanisation in sub-Saharan Africa occurs with little land registration, and government-led regularisation schemes often find limited uptake of title deeds by residents. In theory, there could be private and public benefits from land titling in cities. However, little is known about how landholders value the various dimensions of formal property rights in comparison to informal tenure. We address these questions by unbundling property rights into multiple functions of tenure security and by adopting an innovative combination of methods, including an incentivised willingness-to-pay exercise, a survey, and in-depth interviews conducted in Dar es Salaam, Tanzania. Examining how landholders perceive dimensions of tenure advances our understanding of limited land formalisation in urban Africa and provides evidence for alternative policy approaches to address local demand for tenure security more effectively.

The timing of voluntary delisting

For many firms, voluntarily delisting from a stock exchange can be optimal. We model an entrepreneur's incentives to voluntarily delist the firm as a trade-off between consumption of private benefits when listed and expected improvements in the firm's performance after delisting. Our model allows for heterogeneity across firms and countries, and various micro and macro shocks affect the delisting decision. Such a model makes novel predictions regarding the delisting patterns around the world. We empirically confirm these predictions using manually collected delisting data from 26 countries. Increasing policy and regulatory uncertainties can partially explain the greater popularity of voluntary delistings.

Leveraging Digital Technology to Improve Monitoring and Planning in Public Sector Supply Chains: Evidence From India’s Food Security Program

Governments across the developing world are adopting digital technologies to improve the performance of public sector supply chains. However, empirical evidence regarding the impact of these technologies on performance is mixed. In this paper, we evaluate the impact of using biometric authentication (BA) devices on the performance of India’s food security program. The program aims to deliver subsidized food grains to nearly 160 million low-income households through approximately 500,000 fair price shops (FPSs). Nearly half of those grains do not reach the beneficiaries and are diverted to the open market for private benefit. We estimate the impact of installing BA devices on reducing diversion in more than 3,300 FPSs in the Indian state of Karnataka between 2013 and 2015 using a difference-in-differences approach. We find that BA devices reduce up to 4% of the current diversion at the last mile. We argue that this relatively low impact is due to the presence of a workaround mechanism which results in imperfect monitoring and validate the decrease in diversion mechanism by estimating the differential impact of BA devices. We complement the empirical analysis with a simulation exercise to estimate the additional value that can be unlocked by using the BA devices. We find that the value of better replenishment planning using sales and inventory information captured by BA devices can be significant. The value of better planning can be as high as six times the value of reduction in diversion, depending on the preintervention levels of demand from genuine beneficiaries and diversion at the FPSs.

Assessing the Feasibility and Socioecological Benefits of Climate-Smart Practices at the Watershed Scale

Resource allocation in climate-smart productive practices depends on the explicit recognition and accountability of the expected costs and benefits in socioeconomic and ecological terms. This study assessed the private and social costs and benefits of 10 practices compatible with the transition to sustainable agricultural practices under an integrated landscape management (ILM) approach. First, the financial and economic viability of the alternatives was evaluated with a cost-benefit analysis. Then, the potential contribution of these practices in terms of carbon sequestration and landscape connectivity was determined in an ILM scenario where at least three practices (live fences, isolated trees in pastures, and riparian vegetation recovery) could be implemented and assessed at the watershed scale. These practices were evaluated in three Mexican pilot watersheds with contrasting biophysical and sociocultural contexts but with high importance in biodiversity conservation and cattle production. The results showed that most climate-smart practices are viable in the medium and long term from a private standpoint. However, more significant benefits are achievable over a shorter period when social co-benefits are included. The results could contribute to decision-making in terms of public policy, providing evidence of the financial and economic feasibility of the analyzed climate-smart practices that also have ecological benefits. In this sense, decision-makers who promote such practices have more arguments to seek funding for implementation.

The Role of Tuo Banda Local Institutions in Improving Competitiveness and Implementation of Salibu Technology in Rice Farming in Tanah Datar District, Indonesia

Local Tuo Banda institutions play an important role in irrigation water management to support the application of Salibu technology in rice farming. Data analysis was done quantitatively using the Policy Analysis Matrix (PAM) method. The result showed that Tuo Banda as a local institution in managing irrigation water is very instrumental in ensuring the availability of water for the application of Salibu technology in rice farming in Tanah Datar District, Indonesia. The failure of the implementation of Salibu rice technology so far in some places is due to the absence of local institutions to ensure the availability of irrigation water for Salibu rice farming. Rice business with Salibu technology has competitiveness based on the acquisition of private benefits and social benefits as well as a competitive advantage and comparative advantage.

From dawn to dusk: The relationship between CEO career horizon and ESG engagement

This study investigates the influence of a CEO's career horizon on a firm's engagement in ESG. Given the private benefits which CEOs can extract from this strategy, we argue that a firm's willingness to pursue additional ESG efforts is likely to mirror CEOs' desire to strengthen their personal reputation and curb their perceived risk exposure at each stage of their career horizon. Drawing on the prospect theory, we theorize the decomposition of CEOs' career horizon into two counteracting forces (career concerns and legacy concerns) to explain how a CEO's effort in ESG could change depending on the length of the horizon and the influence of a reference point, such as their firm's performance relative to the industry benchmark. Using a sample of European listed companies from 2007 to 2018, our evidence supports an inverted U-shaped relationship between CEO career horizon and a firm's ESG engagement. This result shows the importance of a CEO's eagerness for personal reputation as a key antecedent of companies' ESG actions. However, a CEO's perceived risk exposure proves not to be a relevant driver of ESG, since we find that such a relationship is not sensitive to decision framing based on relative performance.

선택적 CSR과 외부주주의 감시에 대한 연구

Purpose – This study seeks to explore the impact of outside shareholders on CSR, and discuss how outside shareholders interact with corporate ownership structure to affect CSR. Design/Methodology/Approach – Using longitudinal data from 297 publicly listed companies in Korean large business groups, the study examined the direct and interaction effects of outside shareholders and corporate ownership structure on CSR. It focused on the impact of institutional stockholders holding 5% or more of the equity shares and foreign investors on corporate governance. Findings – While institutional investors do not significantly affect CSR, foreign investors have a positive impact and moderate the effects of corporate ownership structure on CSR. They respectively moderate the positive impact of controlling shareholder ownership and the negative impact of control-ownership disparity on CSR. These findings suggest that foreign investors play a role as independent monitors in aligning corporate governance with CSR objectives in large Korean business groups. Research Implications – The findings highlight the possibility of CSR being exploited for private benefits by controlling shareholders without effective corporate governance. This study emphasizes the need for monitoring and balanced oversight in reducing conflicts over CSR, suggesting the importance of outside shareholder engagement in corporate governance. It posits that outside shareholders, particularly foreign investors, are instrumental in fostering responsible corporate governance and CSR practices.

The downside of blockholder exit threats: Increasing excess cash holdings

AbstractThis study examines the impact of blockholder exit threats on excess cash holdings following China's split‐share structural reform. Previous studies have confirmed the governance role of blockholder exit threats, but their effectiveness is limited to companies with greater private benefits. Using a sample of 2340 firm‐year observations of Chinese listed firms between 2002 and 2009, we find that the exit threat of blockholders increases the level of excess cash holdings. These results suggest that blockholders view exit threats as a means of collaborating with controlling shareholders to boost excess cash holdings and diversify corporate resources for private benefits. The collusion effect is more pronounced in firms with poorer investor protections, lower shareholding concentrations, and more severe agency conflicts. Additionally, in terms of economic consequences, blockholder exit threats decrease buy‐and‐hold abnormal returns and increase the occurrence of corporate scandals. Overall, this study provides empirical evidence of collusion among large shareholders, which harms small shareholders' interests from the perspective of excess cash holdings.