Negative Externalities (negative + externality)

Distribution by Scientific Domains

Selected Abstracts

Why are Europeans so tough on migrants?

ECONOMIC POLICY, Issue 44 2005
Tito Boeri
SUMMARY European migration International migration can significantly increase income per capita in Europe. We estimate that at the given wage and productivity gap between Western and Eastern Europe, migration of 3% of the Eastern population to the West could increase total EU GDP by up to 0.5%. Yet on 1 May 2004, 14 EU countries out of 15 adopted transitional arrangements vis-à-vis the new member states and national migration restrictions vis-à-vis third country nationals are getting stricter and stricter. In this paper we offer two explanations for this paradox and document their empirical relevance in the case of the EU enlargement. The first explanation is that immigration to rigid labour markets involves a number of negative externalities on the native population. The second explanation is that there are important cross-country spillovers in the effects of migration policies, inducing a race-to-the top in border restrictions with high costs in terms of foregone European output. In light of our results, we discuss, in the final section, the key features of a desirable migration policy to be coordinated at the EU level. ,Tito Boeri and Herbert Brücker [source]

Social Contacts and Occupational Choice

ECONOMICA, Issue 305 2010
Social contacts help to find jobs, but not necessarily in the occupations where workers are most productive. Hence social contacts can generate mismatch between workers' occupational choices and their productive advantage. Accordingly, social networks can lead to low labour force quality, low returns to firms' investment and depressed aggregate productivity. We analyse surveys from both the US and Europe including information on job finding through contacts. Consistent with our predictions, contacts reduce unemployment duration by 1,3 months on average, but they are associated with wage discounts of at least 2.5%. We also find some evidence of negative externalities on aggregate productivity. [source]

Impact of Agriculture on Rural Tourism: A Hedonic Pricing Approach

Isabel Vanslembrouck
The increased awareness of farmers' role in the maintenance of rural landscapes may contribute to a reassessment of the place of agriculture in society. In this paper, we look at how this role, in relation to landscape, is valued by rural tourists or, in other words, whether it is a response to a societal demand, as is argued by defenders of multifunctional agriculture. The results from a hedonic pricing analysis indicate that landscape features associated with agricultural activities (such as meadows and grazing cattle) positively influence the demand for rural tourism and have a positive impact on the price tourists are willing to pay for rural accommodation. This is also illustrated by the adverse impact of perceived negative externalities from agricultural production (such as intensive maize cultivation) on this price. [source]


Rachel Weber
We perform a logit analysis of address-level data for every privately initiated demolition permit issued in three Chicago community areas between 2000 and 2003. We find that smaller, older, frame buildings with less lot coverage had a greater probability of being demolished during this period. Political jurisdiction and socioeconomic factors, other than the change in Hispanic population, were less important than expected. Demolished structures were located in appreciating areas, further away from Tax Increment Financing districts. We speculate that this popular redevelopment tool has been used in areas with primarily commercial land uses on the periphery of residential neighborhoods and that rent gaps are reduced by the negative externalities associated with conflicting land uses. [source]

Legislating for Economic Sclerosis: Are Lawyers a Baleful Influence on Growth Rates?

Sam Cameron
Summary William Easterly, an ex-World Bank economist and widely respected growth theorist, in recently noting that skilled individuals may elect to pursue occupations that redistribute income rather than enhance growth, referred to ,the somewhat whimsical piece of evidence , that economies with lots of lawyers grow more slowly than economies with lots of engineers'. The remark alluded to an assertion by the Bush-Quayle camp during the 1992 Presidential campaign that too many lawyers were prejudicial to US economic growth, and sparked a heated debate that was played out in the Wall Street Journal and a number of academic journals at the time. A decade later, Easterly's rejoinder has prompted us to examine the view that occupational capture (the capture of talent by particular occupations) can contribute to economic stagnation, by revisiting the notion of lawyers as negative externalities to the growth process. [source]

Altruism and Determinacy of Equilibria in Overlapping Generations Models with Externalities

Alain Venditti
This paper deals with an OLG model with production and a single commodity, in which agents are assumed altruistic and the aggregate production function contains external effects. I prove that, if the technology satisfies a minor assumption, which encompasses positive and negative externalities, some curvature conditions on the utility function ensure local determinacy of stationary and period 2 equilibria. I prove that non-separable, strictly concave preferences are a fundamental ingredient for the occurrence of indeterminate equilibria. Finally, considering the case of unbounded growth, I establish that for any utility and production functions a unique balanced growth path is globally determinate. JEL Classification Numbers: C62, E32 [source]

Environment and Food Safety in Agriculture: Are Labels Efficient?

Lisette Ibanez
In this article, we try to elicit whether an information on food safety is consistent with a more environmental-friendly agriculture. As the policy makers generally intervene to limit negative externalities in agriculture on the supply side, is a labelling policy an efficient way to reduce pollution levels in this sector? The intuitive reason of a food safety label rests on the fact that consumers seem to be more concerned with information on food safety aspects than on environmental ones. In a vertical differentiation model, we analyse the impacts of labels mentioning food safety and environmental aspects, on firms' profits, consumers' surplus and pollution levels. Given our main assumption that food safety and environmental consequences are directly linked, our principal results show that a labelling policy on food safety can be efficient from an environmental point of view, depending on the initial healthy products proportion in the market. Another result is based on the fact that a label policy can reduce consumer's surplus. [source]

From rent seeking to human capital: a model where resource shocks cause transitions from stagnation to growth

Nils-Petter Lagerlöf
The latter is interpreted as trade or manufacturing. Rent seeking exerts negative externalities on the productivity of human capital. Adding shocks, in the form of fluctuations in the size of the contested resource, the model can replicate a long phase with stagnant incomes and high levels of rent seeking, interrupted by small, failed growth spurts, eventually followed by a permanent transition to a sustained growth path where rent seeking vanishes in the limit. The model also generates a rise and fall of the so-called natural resource curse: before the takeoff, an increase in the size of the contested resource has a positive effect on incomes; shortly after the takeoff, the effect is negative; and on the balanced growth path the growth rate of per capita income is independent of resource shocks. Les auteurs présentent un modèle de croissance où les agents divisent leur temps entre la chasse aux rentes (sous la forme de concurrence pour la ressource existante) et le travail productif dans le secteur du capital humain. Cette dernière activité peut se faire dans le commerce ou le secteur manufacturier. La chasse aux rentes a des effets externes négatifs sur la productivité du capital humain. Si l'on injecte des chocs prenant la forme de fluctuations dans la taille de la ressource contestée, le modèle peut générer une longue période durant laquelle les revenus stagnent et le niveau de chasse aux rentes est élevé, période interrompue par des petits sursauts de croissance qui tournent court, et suivie éventuellement par une transition permanente à un sentier de croissance soutenue où, à la limite, les activités de chasse aux rentes disparaissent. Le modèle génère aussi l'apparition et la disparition de la malédiction des ressources naturelles: avant que la croissance prenne son envol, un accroissement de la taille de la ressource contestée a un effet positif sur les revenus; peu après le décollage, l'effet est négatif; et sur le sentier de croissance équilibrée, le taux de croissance des revenus per capita est indépendant des chocs sur la ressource. [source]

Strategic behavior in a service industry

Pekka Ilmakunnas
A model of service duopoly is formulated, where the arrival of customers and their service time in the firm are stochastic. The firms first choose the service capacity, and given the capacity they then choose the price in a Bertrand competition. Capacity choices have a negative externality on the competitor, since increased capacity in one firm decreases its expected full price (price plus cost of waiting) and leads to a flow of customers from the other firm. If the firms choose capacities strategically, it is optimal to underinvest compared to the non-strategic case, but this result may arise in different ways. By underinvesting the firms commit themselves to longer queues (lower quality) to relax price competition. Copyright © 2002 John Wiley & Sons, Ltd. [source]

Selling licences for a process innovation: the impact of the product market on the selling mechanism

Aniruddha Bagchi
Abstract., This article considers the sale by a research lab of licences for a cost-reducing innovation. The marginal cost of a firm that wins a licence is private information and the acquisition of a licence imposes a negative externality on the other firms. The lab's optimal revenue is determined from a class of mechanisms in which the lab selects the number of licences and the reserve price before the sale. The role of the downstream product market in the determination of the number of licences is analyzed. Furthermore, it is also shown that the optimal reserve price may be zero. Ce mémoire étudie la vente par un laboratoire de recherche de licences pour l'utilisation d'une innovation qui réduit les coûts. Le coût marginal de la firme qui obtient la licence est une information qui demeure privée, et cette acquisition impose un effet externe négatif sur les autres firmes. Le revenu optimal du laboratoire est déterminé par le choix qu'il fait dans une classe de mécanismes: le laboratoire peut choisir le nombre de licences qu'il émettra et le prix le plus bas auquel il est prêt à vendre. On analyse le rôle de la nature du marché du produit en aval sur le nombre de licences. On montre aussi que le prix optimal auquel on voudra vendre peut être zéro. [source]