Significant Negative Externalities Research Articles

Pollution and congestion in urban areas: The effects of low emission zones

The great weight that the car has as a means of mobility in large cities generates significant negative externalities both in terms of pollution and congestion. The goal of this paper is to examine the effectiveness of low emission zones (LEZs) and to compare it with the existing results in literature on the effectiveness of urban tolls. First, we build up a theoretical model that departs from De Borger and Proost (2012), who study the effects of urban tolls on congestion, by incorporating pollution into the analysis and LEZs as an alternative (quantity-based) policy measure. Then we perform an econometric analysis taking advantage of a unique and extremely original panel of large European urban areas over the period 2008–2016, using data on congestion from TomTom and data on pollution (PM2.5) from environmental sciences. We conclude that LEZs can curb pollution. They are particularly effective in highly polluted cities, when they are applied to a wide area of the city, and/or when they are stringent in the type of restricted vehicles. Instead, LEZs are ineffective in mitigating congestion. This is a very relevant result, given the growing importance of LEZs in Europe.

Political costs and corporate tax avoidance: Evidence from sin firms

The products and services of firms operating in sin industries (alcohol, tobacco, gambling, and firearms) run contrary to social norms and can produce significant negative externalities for society. As such, we expect that sin firms are at greater risk of incurring political costs in the form of additional regulation, higher excise taxes, or capital market intervention if they come under scrutiny for their income tax avoidance practices. Because of the nature of their products, regulators and policymakers are likely to face less pushback on new regulations or taxes on these firms. Sin firms start with a lower ability to influence the political process than firms in non-sin industries. Consequently, we hypothesize and find that sin firms exhibit less tax avoidance than non-sin firms, particularly through uncertain and more risky tax avoidance strategies. The negative relationship between the status of sin firms and tax avoidance is less pronounced in firms that accumulate political capital via intensive lobbying activities. Exploiting changes in partisan control of the Congress and White House, difference-in-differences tests show that firearm firms engage in less (more) tax avoidance when the Democrats (Republican) control both the Congress and White House. Overall, we conclude that political costs play an important role in corporate tax avoidance decisions.

How swachh (clean) is urban India today?

Where public supply has failed and made unsatisfactory progress in supplying drinking water, the private sector has readily stepped in to supply citizens with drinking water – most often to make big money. Much of the water bottling industry (i) provides a highly inelastic good, (ii) is immensely profitable and (iii) has significant negative externalities on public utilities, the natural environment and the quality of life in urban settings. The wide-spread introduction of a tax on the commercial water extraction and/or bottled or sachet water is ripe. The new mantra must not be “3Rs”, but “4Rs” – reduce, reuse, remunerate, recycle.

Towards a Principled Approach for Bailouts of COVID-Distressed Critical/Systemic Firms

In this essay, we propose a principled approach for government bailouts of critical/systemic firms who find themselves in COVID-19-induced financial distress. We also demonstrate why bankruptcy is the wrong tool to address the problems of these types of firms. The current pandemic threatens lives and livelihoods across the world. A key difference compared to previous market shocks is that lockdowns and related measures have, in certain instances, made it impossible for businesses to conduct their operations. This has resulted in a very specific type of distress, one that bankruptcy is not in the best position to address effectively. If there are no revenues, the design of bankruptcy laws makes them an inadequate tool – and the sheer volume of companies going through the process may put severe stress on the system. The difficulties that the vast majority of companies are encountering may be better solved using different tools: bailouts, bail-ins or a combination thereof, deployed by the government in wide-ranging statutory schemes. However, these schemes may not adequately address the issues of all companies; and the preservation of some of them – those that we refer to as critical/systemic – may be of such significant value to society that more intense assistance from the government is justified. We engage with the characteristics of firms that should be considered critical/systemic and the principles that should guide ad hoc rescues of those companies by the government. Firms are critical/systemic if their failure imposes significant negative externalities on the economy (or, conversely, their preservation generates significant positive externalities) or if they provide the public with an “infrastructure” not otherwise provided by the private sector. If firms are critical/systemic, the government should have the ability to bail them out, going beyond applicable statutory schemes and ensuring that the relevant externalities are considered when deciding whether to keep these companies as going concerns. Bankruptcy is a private process. It is not designed to vindicate such public considerations. Government bailouts, however, should be governed by principles, as any government intervention in the economy, and its associated efficiency and distributional effects must be considered with care. The guiding principles that we propose and elaborate on are (i) proportionality, (ii) efficiency, (iii) equity and (iv) transparency. The application of these principles should ensure that, if the government takes ownership of a private firm through an ad hoc bailout, this is a tool of last resort, and not more than temporary – and that the pre-distress investors properly contribute to the necessary measures.

Spillover effects of economic complexity on the per capita GDP growth rates of Mexican states, 1993-2013

espanolResumen: La apertura de la economia mexicana transformo por completo la dinamica de crecimiento del Producto Interno Bruto (PIB) per capita de los diversos estados del pais, con una clara tendencia a concentrar el crecimiento en regiones especificas. En este estudio, cuantificamos el efecto derrame o indirecto de la complejidad economica sobre el crecimiento con base en los siguientes dos hechos: i) la complejidad economica es un factor importante para explicar las tasas de crecimiento del PIB, y ii) hay un patron regional claro en la complejidad economica de los estados, i.e., la variable complejidad economica muestra una autocorrelacion espacial positiva. Nuestros resultados muestran: i) que el efecto derrame o indirecto estimado de la complejidad en el crecimiento es positivo y no insignificante, particularmente para los estados del norte del pais, cuya propia complejidad economica es tan importante como la de sus vecinos. Por el contrario, el efecto indirecto en los estados del sur es negativo. Estar ubicado al lado de estados con bajos niveles de complejidad economica tiene una externalidad negativa significativa que casi anula el efecto positivo del propio nivel de complejidad de un estado. Nuestros hallazgos nos llevan a concluir que los efectos indirectos pueden haber jugado un papel mas importante para explicar el patron diverso de crecimiento entre el norte y el sur de Mexico de lo que se pensaba anteriormente. EnglishAbstract: The opening up of the Mexican economy completely transformed the growth dynamics of the per capita Gross Domestic Product (GDP) of the country’s various states, with a clear tendency towards growth being concentrated in specific regions. In this study, we quantify the indirect or spillover effect of economic complexity on growth based on the following two facts: i) economic complexity is an important factor in explaining GDP growth rates, and ii) there is a clear regional pattern in the states’ economic complexity, i.e., the economic complexity variable shows a positive spatial autocorrelation. Our results provide two insights: first, that the estimated positive spillover effect of complexity on growth is not negligible, particularly for states in the north of the country, whose own economic complexity is as important as that of their neighbors. In contrast, the spillover effect in southern states is negative. Being located next to states with low levels of economic complexity has a significant negative externality that almost overrides the positive effect of a state’s own level of complexity. Our findings lead us to conclude that spillover effects may have played a more important role in explaining the diverse pattern of growth between northern and southern Mexico than previously thought.

The unintended consequences of biotechnology innovation adoption

ABSTRACT We conjecture that adoption of agricultural biotech innovation imposes relationship-specific investments that exacerbate hold-up costs between biotech producers and farmers. Moreover, the increasing presence of biotech reduces biodiversity, which is a significant negative externality on food production across farms. As such, increasing biotech has the potential to exacerbate food insecurity. By contrast, certified organic operations have the potential to have the opposite effect. We examine 15 agrarian states in the U.S. and find evidence strongly consistent with these propositions. We discuss implications for policy, practice, and future research.

Economic and environmental analysis of measures from a Sustainability Urban Mobility Plan – Application to a small sized city

Urban mobility causes significant negative externalities namely emissions from individual transport. Sustainable Urban Mobility Plans (SUMPs) have been designed and implemented in an attempt to reduce transport-related externalities, setting several measures to improve the efficiency and sustainability of urban mobility. The assessment of environmental and economic impacts of the measures predicted in a SUMP can be potentially useful for supporting decision-making and encouraging policy makers to implement the proposed measures with success.In this paper, a case study is performed to analyze the economic and environmental impacts of the measures predicted in a SUMP of a small sized city in Portugal. It consists of estimating the emissions and external costs for a base live scenario and after the measures are implemented, as well as to perform an economic analysis based in economic indicators such as Net Present Value (NPV) and Internal Rate of Return (IRR). All the measures equated showed a great potential of emissions reduction. One of the measures can reach a CO2 reduction of about 9% and a reduction of external costs of around 11%. The measures were all aggregated as a single project, analyzing the economic aspects, using the external costs as a mean of economic measurement, it was possible to conclude that the project is profitable after 6 years and half with a NPV of 1.245.448€ and an IRR of 10% (which is above the discount rate of 2,3%).

RE: Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice

The SEC’s recently proposed Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice is an efficient and necessary response to the “collective action” problem that is imbedded in the shareholder voting of public companies and the deficiencies that this problem creates in the voting recommendations of proxy advisors. The amendments will enhance the value of voting recommendations by requiring proxy advisors to make much needed investments in a few key areas of the voting recommendation process. Part I of this letter will describe the collective action problem that is at the heart of shareholder voting. Part II will discuss the problems that this collective action causes for the voting recommendations of proxy advisors, including the creation of a resource constrained business environment. Part III discusses how proxy advisors deal with such a business environment. Part IV will discuss how the market for voting recommendations is an example of a market failure, requiring the SEC to pursue regulatory action to mitigate the harm caused by two significant negative externalities. Part V will discuss how the collective action problem of shareholder voting and the market failure impacts corporate governance. Part VI will discuss the value of the proposed amendments.

The dynamic relationship between CO2emission, international tourism and energy consumption in Pakistan: a cointegration approach

PurposeThe present study aims to investigate the dynamic relationship between international tourist receipts, economic growth, energy use and carbon dioxide (CO2) emissions in Pakistan over the period 1980-2016. Many researchers have investigated the link between tourism and CO2emissions, but there is no clear picture as the results are contradictory. This study is an attempt to compliment the literature related to tourism and environmental quality.Design/methodology/approachThe study adopted the autoregressive distributed lagged (ARDL) model to investigate the short- and long-run estimates simultaneously. The study further applied Granger causality to find out the direction of causalities. To arrive at long-run robust estimates, the study used dynamic ordinary least squares (DOLS) model.FindingsThe results found that tourist receipts have no significant impact on environmental quality, while growth and energy consumption are the main determinants of CO2emissions in Pakistan. The Granger causality test confirmed unidirectional causalities from GDP and energy consumption toward CO2emissions, while tourist receipts do not affect environmental quality. DOLS technique confirmed the long-run estimates of ARDL model.Research limitations/implicationsThe result of the study complements the literature by adding new evidence regarding the nexus of tourism and environment. Findings of the study are important for policymakers and regulatory bodies to place their focus on the development of tourism sector (services sector) rather than energy-intensive manufacturing activities to sustain the growth of the country in higher quartiles, as tourism receipts have no significant negative externalities toward environment, while energy use is one of the key determinants of environmental degradation.Originality/valueThis study used time series data over the period 1980-2016 for Pakistan to inspect the dynamic relationship between tourist receipts, economic growth, energy consumption and CO2emissions.

Rainfall Uncertainty and Drought Proofing Strategies by farmers in Southern India

Droughts are a common occurrence in semi-arid areas and their frequency and intensity is expected to increase further with increasing variability in rainfall distribution. Based on a study of 120 farmers from 4 districts in Karnataka and Tamil Nadu, this paper identified the range of measures farmers adopt in response to droughts. Despite significant negative externalities, farmers assign higher priority to drilling new wells rather than investing in water conservation structures or demand management strategies. Among the different strategies followed, adoption of drip irrigation and purchase of tanker water for providing life-saving irrigation to perennial crops yield the highest financial return. Expansion of micro irrigation and reuse of municipal waste water are suggested as drought mitigation strategies.

Climate change and the transition to a low carbon economy – Carbon targets and the carbon budget

Carbon intensive fuels generate a significant negative externality which is quite relevant for climate change mitigation policy. We propose a dynamic growth model where output is produced using two types of energy sources: fossil fuel and renewable energy. Fossil fuel discovery, extraction, and associated costs are incorporated in our model together with the dynamics of greenhouse gas emissions and consequent damages. Consistent with the empirical facts, our numerical solutions suggest that fossil fuels, especially coal, should not be exploited to depletion. Furthermore, renewable energy should be gradually phased in to meet targets consistent with the Paris 2015 agreement. We show that adopting those policies should slow down the growth rate of cumulative emissions; but the outcome is contingent upon the carbon emission targets set for advanced countries, as distinct from those assigned to developing countries.

Political Effectiveness, Negative Externalities, and the Ethics of Economic Sanctions

AbstractAs part of the roundtable “Economic Sanctions and Their Consequences,” this essay discusses whether economic sanctions are morally acceptable policy tools. It notes that both conventional and targeted sanctions not only often fail to achieve their stated objectives but also bring about significant negative externalities in target countries. Economic dislocation and increases in political instability instigated by sanctions disproportionately affect the well-being of opposition groups and marginalized segments of society, while target elites and their support base remain insulated from the intended costs of foreign pressure. Sanctions might also incentivize target governments to use repressive means to consolidate their rule and weaken the opposition. Given these serious shortcomings, I argue that sanctions are ethically problematic tools of foreign policy. Nonetheless, this does not mean that sanctions should be rejected outright, as there might be cases where sanctions are the only viable option, and they might work effectively under certain circumstances. Rather, the essay suggests that policymakers should apply more caution in considering the use of sanctions given their low probability of success, and should be more concerned with the delicate balance between political gain and civilian pain before levying sanctions, whether comprehensive or targeted.

Macroeconomic Gains from Reforming the Agri-Food Sector: The Case of France

France is the top agricultural producer in the European Union (EU), and agriculture plays a prominent role in the country’s foreign trade and intermediate exchanges. Reflecting production volumes and methods, the sector, however, also generates significant negative environmental and public health externalities. Recent model simulations show that a well-designed shift in production and consumption to make the former sustainable and align the latter with recommended values can curb these considerably and generate large macroeconomic gains. I propose a policy toolkit in line with the government’s existing sectoral policies that can support this transition.

Measuring progress towards transport sustainability through indicators: Analysis and metrics of the main indicator initiatives

Transport is widely considered as a sector with significant positive and negative externalities affecting society, environment and economy. The fact of incorporating the main principles of sustainable development into transport planning is of prime importance. However, moving towards transport sustainability is a challenging task; it requires a paradigm shift as well as the constant monitoring and intensive evaluation of the current conditions through broadly accepted methodological tools such as indicators. In this context, the scope of the current research is to provide a complete picture of the approaches which aim at measuring progress towards transport sustainability as well as facilitating the development of new initiatives by highlighting the major trends. Consequently, a considerable number (78) of sustainable transport indicator initiatives were selected through an extensive literature review. Accordingly, descriptive statistics was used regarding the main features of the examined initiatives, while an analysis focused on the 2644 included indicators was subsequently implemented. The current research illustrates the linkages among the sustainability pillars and the selected objectives/themes. It also points out the great variability regarding the hierarchical structure, categorizes the considerable number of themes found in the literature into smaller groups, presents the most commonly used themes and indicators, and finally proposes an alternative categorization of weighting schemes concerning indexes. An attempt has been made so that this study can become a meaningful operational tool for researchers aiming at promoting the relevant research by contributing to the selection of the most suitable yet compatible and scientifically valid methods for each case.

How Can Urban Congestion Be Mitigated? Low Emission Zones vs. Congestion Tolls

The great weight that the car has as a means of mobility in large cities generates significant negative externalities both in terms of pollution and congestion. The goal of this paper is to examine the effectiveness of low emission zones (LEZ), which are being implemented extensively in Europe. First, we extend the theoretical framework on urban tolls used in de Borger and Proost (2012) to analyze the effects of LEZ. Then we perform an econometric analysis taking advantage of a unique and extremely original panel of large European urban areas over the period 2008-2016, using data on congestion from TomTom and data on pollution (PM2.5) from environmental sciences. We conclude that LEZ abate pollution, especially in severely polluted cities. Instead, they are ineffective in mitigating congestion. This is a very relevant result, given the growing importance of LEZ in Europe.

The impact of in-house unnatural death on property values: Evidence from Hong Kong

The occurrence of in-house unnatural death could negatively affect the value of housing property. This study evaluates the geographic and temporal scope of the impact of unnatural death on property values in Hong Kong. By exploiting the spatial and intertemporal variation of the shock in a difference-in-differences approach, we find significant negative externalities of unnatural death incidence on neighborhood housing values. On average, units in which an unnatural death occurred experience a 25% drop in value following the death. Nearby units on the same floor also show a significant price drop of 4.5%. Prices of units on other floors of the same building decline about 2.6%. Units in other buildings of the same estate observe a price decline of about 1% on average. However, the price for nearby estates within 300 m shows a positive impact of 0.5%, suggesting a very localized sorting mechanism. Temporally, price evolution after death incidence follows a U shape. Housing prices continue to decline up to 4–5 years after deaths and recover gradually afterwards. We also document the heterogeneity of the impact by the type of death incidence (murder, suicide, or accident) and the type of homebuyers (local buyer, investment firm, and other buyers). We find that the negative externalities of death incidence are largely due to a severe stigma effect, rather than channels through the revealed crime risk or the price contagion effect.

ЕНДОГЕННІ ДЖЕРЕЛА КОНФЛІКТУ ІНТЕРЕСІВ У ДІЯЛЬНОСТІ КРЕДИТНО-РЕЙТИНГОВИХ АГЕНТСТВ

У статті визначені, охарактеризовані та систематизовані ключові ендогенні джерела розгортання конфліктів інтересів як на корпоративному, так і на операційному рівнях функціонування кредитно-рейтингових агентств (КРА). Урахування специфіки окреслених ендогенних джерел у їх взаємозв’язку сприятиме проектуванню комплексної системи інструментів превентивного та реактивного управління конфліктами інтересів з боку власників, керівників а також регуляторів діяльності КРА.

A Diploid Evolutionary Algorithm for Sustainable Truck Scheduling at a Cross-Docking Facility

Supply chains have become more time-sensitive in recent years. Delays in supply chain operations may cause significant negative externalities, including lost sales and customers. In order to facilitate the product distribution process within supply chains, reduce the associated delays, and improve sustainability of the supply chain operations, many distribution companies started implementing the cross-docking technique. One of the challenging problems in management of the cross-docking facilities is efficient scheduling of the arriving trucks. This study proposes a novel Diploid Evolutionary Algorithm for the truck scheduling problem at a cross-docking facility, which—unlike the Evolutionary Algorithms presented in the cross-docking literature to date—stores the genetic information from the parent chromosomes after performing a crossover operation. The objective of the formulated mathematical model is to minimize the total truck service cost. The conducted numerical experiments demonstrate that the optimality gap of the developed algorithm does not exceed 0.18% over the considered small size problem instances. The analysis of the realistic size problem instances indicates that deployment of the developed solution algorithm reduces the total truck handling time, the total truck waiting time, and the total truck delayed departure time on average by 6.14%, 32.61%, and 34.01%, respectively, as compared to a typical Evolutionary Algorithm. Furthermore, application of the diploidy concept decreases the total truck service cost by 18.17%.

Koszty zewnętrzne transportu w Polsce

The development of transport sector is very closely linked to the process of socio-economic development. The interrelations between transport and economic growth are complex and there are many feedbacks. Transport has a vital role – it brings the markets closer together, increases production, activates regions around the infrastructure, enabling other sectors to function smoothly. Transport is also the source of many significant negative externalities for the environment, society and economy. It also turns out that, despite many years of experience in the study of the external effects and costs of transport, there are still large discrepancies in approaches and research methods, as well as terminology and rules for defining the concepts. The aim of this article is to review available studies on the estimation of external costs and to estimate these costs for transport in Poland using methods recommended by the European Commission. Knowledge of the cost external of transport is the basis for the internalisation of these costs and it allow to choose the most effective transport policy instruments.

Endogenous Timing in Mixed Duopolies With Externality

We investigate endogenous timing in a mixed duopoly with a negative externality. We find that quantity (price) competition yields a simultaneous‐move (sequential‐move) outcome under a significant negative externality. These results indicate that mixed duopolies yield the same results as private duopolies under a significant negative externality, which is in sharp contrast to the results in mixed duopolies without a negative externality. Unless the negative externality is insignificant, public leadership yields greater welfare than private leadership, and public leadership is more robust than the private leadership as equilibrium. If optimal environmental tax policy is introduced, however, private leadership yields the greatest welfare and this an equilibrium outcome in the endogenous timing game under quantity competition.