Evaluation of social externalities of rapid economic development associated with major resource projects in regional communities

This thesis developed a thematic structure for evaluating social externalities of major resource projects using a mixed methods approach and structural equation modelling. The implications offer important insights into the extent quality of life is being influenced by coal seam gas projects in regional communities in Southeast Queensland, Australia. Findings show that unresolved concerns of community residents about environmental and social impacts contribute to lower life-satisfaction, inhibit the community to plan for the future, and lead to a weaker local economy.

Nation & internation practices in decision support tools in road asset management

This document provides a review of international and national practices in investment decision support tools in road asset management. Efforts were concentrated on identifying analytic frameworks, evaluation methodologies and criteria adopted by current tools. Emphasis was also given to how current approaches support Triple Bottom Line decision-making. Benefit Cost Analysis and Multiple Criteria Analysis are principle methodologies in supporting decision-making in Road Asset Management. The complexity of the applications shows significant differences in international practices. There is continuing discussion amongst practitioners and researchers regarding to which one is more appropriate in supporting decision-making. It is suggested that the two approaches should be regarded as complementary instead of competitive means. Multiple Criteria Analysis may be particularly helpful in early stages of project development, say strategic planning. Benefit Cost Analysis is used most widely for project prioritisation and selecting the final project from amongst a set of alternatives. Benefit Cost Analysis approach is useful tool for investment decision-making from an economic perspective. An extension of the approach, which includes social and environmental externalities, is currently used in supporting Triple Bottom Line decision-making in the road sector. However, efforts should be given to several issues in the applications. First of all, there is a need to reach a degree of commonality on considering social and environmental externalities, which may be achieved by aggregating the best practices. At different decision-making level, the detail of consideration of the externalities should be different. It is intended to develop a generic framework to coordinate the range of existing practices. The standard framework will also be helpful in reducing double counting, which appears in some current practices. Cautions should also be given to the methods of determining the value of social and environmental externalities. A number of methods, such as market price, resource costs and Willingness to Pay, are found in the review. The use of unreasonable monetisation methods in some cases has discredited Benefit Cost Analysis in the eyes of decision makers and the public. Some social externalities, such as employment and regional economic impacts, are generally omitted in current practices. This is due to the lack of information and credible models. It may be appropriate to consider these externalities in qualitative forms in a Multiple Criteria Analysis. Consensus has been reached in considering noise and air pollution in international practices. However, Australia practices generally omitted these externalities. Equity is an important consideration in Road Asset Management. The considerations are either between regions, or social groups, such as income, age, gender, disable, etc. In current practice, there is not a well developed quantitative measure for equity issues. More research is needed to target this issue. Although Multiple Criteria Analysis has been used for decades, there is not a generally accepted framework in the choice of modelling methods and various externalities. The result is that different analysts are unlikely to reach consistent conclusions about a policy measure. In current practices, some favour using methods which are able to prioritise alternatives, such as Goal Programming, Goal Achievement Matrix, Analytic Hierarchy Process. The others just present various impacts to decision-makers to characterise the projects. Weighting and scoring system are critical in most Multiple Criteria Analysis. However, the processes of assessing weights and scores were criticised as highly arbitrary and subjective. It is essential that the process should be as transparent as possible. Obtaining weights and scores by consulting local communities is a common practice, but is likely to result in bias towards local interests. Interactive approach has the advantage in helping decision-makers elaborating their preferences. However, computation burden may result in lose of interests of decision-makers during the solution process of a large-scale problem, say a large state road network. Current practices tend to use cardinal or ordinal scales in measure in non-monetised externalities. Distorted valuations can occur where variables measured in physical units, are converted to scales. For example, decibels of noise converts to a scale of -4 to +4 with a linear transformation, the difference between 3 and 4 represents a far greater increase in discomfort to people than the increase from 0 to 1. It is suggested to assign different weights to individual score. Due to overlapped goals, the problem of double counting also appears in some of Multiple Criteria Analysis. The situation can be improved by carefully selecting and defining investment goals and criteria. Other issues, such as the treatment of time effect, incorporating risk and uncertainty, have been given scant attention in current practices. This report suggested establishing a common analytic framework to deal with these issues.

Sustainability in infrastructure investment : building the business case

Many infrastructure agencies adopt sustainability objectives at a corporate level and incorporate sustainability targets and indicators as part of corporate reporting processes. These objectives are expected to translate to all stages of the project delivery process, including project selection. For infrastructure capital works projects and programs, a robust project management approach involves the development of a business case to guide investment decision making. A key tool in the assessment of project options and selection of a delivery strategy is Cost Benefit Analysis (CBA). Infrastructure providers are required to undertake cost benefit analysis to support project selection through regulatory approval and budgetary processes. This tool has emerged through the prism of economic analysis rather than sustainability. A literature review reveals the limitations of CBA alone to effectively evaluate economic, environmental and social externalities or impacts that apply over a long time frame, and that are ultimately irreversible. Multi-Criteria Analysis (MCA) has been introduced as a means to incorporate a wider array of factors into decision making such as sustainability. This, however, presents new challenges with issues around how to transparently represent wider community values in the selection of a preferred solution. Are these tools effective in assessing the wider sustainability costs and benefits taking into account that these are public works with long life spans and significant impacts across institutional boundaries? The research indicates a need to develop clear guidelines for investment decision making in order to better align with corporate sustainability objectives. Findings from the literature review indicate that a more sustainable approach to investment decision-making framework should include: the incorporation of sustainability goals from corporate planning documents; problem definition and option generation using best practice investment management guidelines; improved guidelines for Business Case development using a combination of both Cost Benefit Analysis and Multi-Criteria Analysis; and an integrated public participation process.

Social and environmental accounting research : major contributions and future directions for developing countries

A review is provided of major contributions in social and environmental accounting literature focusing on the issues of developing countries. The review of prior research shows that the major contributions have been related to the motivations for social and environmental disclosure. However, other important research areas such as ethical/accountability issues and how to cost externalities which have already been considered within the developing country context. Contemporary social and environmental issues such as climate change and greenhouse gas emissions affecting the global community also appear to be key issues of research to scholars in both developed and developing countries. Finally, some future research directions are identified.

Navigating the social dimension of sustainability decision making of mega-projects

Until recently, sustainable development was perceived as essentially an environmental issue, relating to the integration of environmental concerns into economic decision-making. As a result, environmental considerations have been the primary focus of sustainability decision making during the economic development process for major projects, and the assessment and preservation of social and cultural systems has been arguably too limited. The practice of social impact and sustainability assessment is an established and accepted part of project planning, however, these practices are not aimed at delivering sustainability outcomes for social systems, rather they are designed to minimise ‘unsustainability’ and contribute to project approval. Currently, there exists no widely recognised standard approach for assessing social sustainability and accounting for positive externalities of existing social systems in project decision making. As a result, very different approaches are applied around the world, and even by the same organisations from one project to another. This situation is an impediment not only to generating a shared understanding of the social implications as related to major projects, but more importantly, to identifying common approaches to help improve social sustainability outcomes of proposed activities. This paper discusses the social dimension of sustainability decision making of mega-projects, and argues that to improve accountability and transparency of project outcomes it is important to understand the characteristics that make some communities more vulnerable than others to mega-project development. This paper highlights issues with current operational level approaches to social sustainability assessment at the project level, and asserts that the starting point for project planning and sustainability decision making of mega-projects needs to include the preservation, maintenance, and enhancement of existing social and cultural systems. It draws attention to the need for a scoping mechanism to systematically assess community vulnerability (or sensitivity) to major infrastructure development during the feasibility and planning stages of a project.

A Previdência Social no estado contemporâneo Fundamentos, financiamento e regulação

A previdência social brasileira, apesar de constituir um dos modelos mais antigos e tradicionais de proteção social da América Latina, não muito distante dos modelos europeus quanto a sua gênese, passa por momentos difíceis. Em um contexto de rápido envelhecimento populacional, acelerada redução de natalidade e novas realidades de trabalho, nas quais a mão-de-obra assalariada perde seu espaço, o modelo tradicional de cobertura, nos moldes bismarckianos, carece de revisão, de forma a não somente adequar-se às novas premissas demográficas, mas permitir uma universalidade de cobertura efetiva. Para tanto, adota-se, como fundamento de um novo modelo, a justiça social em três dimensões necessidade, igualdade e mérito. A necessidade visa atender e assegurar a qualquer pessoa, dentro das necessidades sociais cobertas, um pagamento mínimo de forma a assegurar o mínimo existencial. A dimensão da igualdade, no viés material, visa preservar nível de bem-estar compatível, em alguma medida, com o usufruído durante a vida ativa. Já o mérito individual implica fornecer prestações mais elevadas aos que, conscientemente, reduziram o consumo presente, preservando parte de suas receitas para o futuro. As duas primeiras dimensões são, na proposta apresentada, organizadas pelo Estado, em pilares compulsórios e financiados, preponderantemente, por repartição simples. O modelo de financiamento adotado, no longo prazo, tem se mostrado mais seguro e isonômico frente a modelos capitalizados. As variantes demográficas podem ser adequadas mediante novos limites de idade para aposentadorias e, em especial, estímulo a natalidade, como novos serviços da previdência social, incluindo creches e pré-escolas. O terceiro pilar, fundado no mérito individual, é a previdência complementar, organizado de forma privada, autônoma e voluntária. Aqui, o financiamento sugerido é a capitalização, de forma a priorizar o rendimento e a eficiência, com as externalidades positivas para a economia e a sociedade, com risco assumido e aceitável em razão do papel subsidiário deste pilar protetivo. Os pilares estatais, no modelo proposto, serão financiados, exclusivamente, por impostos, pondo-se fim às contribuições sociais, que perdem a importância em um modelo universal de proteção. Troca-se a solidariedade do grupo pela solidariedade social e, como conseqüência, saem as contribuições e ingressam os impostos. Mesmo o segundo pilar, que visa prestações correlacionadas com os rendimentos em atividade, será financiado por adicional de imposto de renda. Sistema mais simples, eficaz, e com estímulo à formalização da receita por parte das pessoas. A gestão do modelo previdenciário, em todos os segmentos, contará com forte regulação estatal, mas com efetiva participação dos interessados, afastadas, dentro do possível, as ingerências políticas e formas de captura. A regulação previdenciária, desde adequadamente disciplinada e executada, permitirá que os pilares propostos funcionem em harmonia.

Network externalities across financial institutions

We propose and estimate a financial distress model that explicitly accounts for the interactions or spill-over effects between financial institutions, through the use of a spatial continuity matrix that is build from financial network data of inter bank transactions. Such setup of the financial distress model allows for the empirical validation of the importance of network externalities in determining financial distress, in addition to institution specific and macroeconomic covariates. The relevance of such specification is that it incorporates simultaneously micro-prudential factors (Basel 2) as well as macro-prudential and systemic factors (Basel 3) as determinants of financial distress. Results indicate network externalities are an important determinant of financial health of a financial institutions. The parameter that measures the effect of network externalities is both economically and statistical significant and its inclusion as a risk factor reduces the importance of the firm specific variables such as the size or degree of leverage of the financial institution. In addition we analyze the policy implications of the network factor model for capital requirements and deposit insurance pricing.

Impact of externalities on sustainable development: evidence from public-private partnerships in Kazakhstan and Russia

Purpose – This paper aims to investigate the influence of public-private partnerships (PPPs) on social and economic conditions in Kazakhstan and Russia from a public economics perspective, namely, through the lens of a market failure and PPPs’ negative externalities. Design/methodology/approach – Drawing on the concept of a market failure and using the externalities perspective, the paper investigates whether partnerships are instrumental in solving market problems, which is illustrated by the evidence from ongoing PPP projects in Kazakhstan and Russia. Findings – Results show that citizens face expansion of monopolistic trends in the service provision and decreased availability of public services. Additionally, the government support to partnerships recreates a negative externality in the form of a higher risk premium on loan interest rates that banks use to finance PPPs. The partnerships’ impact on sustainable development often appears detrimental, as they significantly intensify the struggle between sub-national governments for increased transfers from the national budget. Practical implications – The government agencies must incorporate the appraisal of the PPP externalities and their effects on the society in the decision-making regarding the PPP formation. Originality/value – The authors suggest that, although government is interested in PPPs’ positive externalities, in reality many negative externalities may offset the positive spillover effects. As a result, the partnerships’ contributions to economic and social sustainability remain controversial. Extending the value-for-money concept to incorporate the assessment of PPP externalities might significantly enhance the partnership conceptualisation by more comprehensive and accurate assessment of PPPs’ economic and social value.

Megaprojetos de hidrelétricas brasileiras: um olhar sobre responsabilidade social corporativa

Em um mundo onde a questão da necessidade de se preservar o meio ambiente e de movimentos socialmente responsáveis em alta, este trabalho surgiu da curiosidade de se buscar entender o binômio do desenvolvimento econômico versus o desenvolvimento sustentável, visando compreender como se deu a evolução desta relação em grandes projetos hidrelétricos brasileiros. Neste contexto, os levantamentos de acontecimentos à época da construção de Itaipu serviram de base comparativa para o que hoje está sendo vivenciado pela hidrelétrica de Santo Antônio. É fato que projetos desse porte vão causar impactos e externalidades, porém como, hoje estão sendo tratadas, é algo que pode nortear o andamento futuro de sua gestão. Por isso, questões como a preservação da fauna e flora, reassentamento e desenvolvimento local, foram colocadas na pauta para verificação de como, ainda hoje, mesmo com o avanço da tecnologia e com pressões externas a respeito da questão sustentável, as externalidades desses projetos são as mesmas. As luzes das teorias apresentadas de Responsabilidade Social Corporativa, desenvolvimento sustentável e econômico, além da estruturação dos movimentos sociais, servirão de base para entender as questões apresentadas. Identificou-se que o sacrifício de poucos para usufruto de muitos continua a ser uma das principais questões a ser resolvida, e neste, inclui-se a questão da terra, assim como a não integração entre stakeholders e shareholders para se conseguir em alinhamento a melhor forma de se aproveitar e interagir com o meio em que será inserido o empreendimento, a exclusão política dos stakeholders do processo decisório sobre os projetos hidrelétricos a serem implementados.

Review of Caribbean economic and social performance in the 1980's and 1990's

Includes bibliography

Social vulnerability, insurance and risk diversification in Latin America and the Caribbean

Includes bibliography

A Spatial Propensity Score Matching Evaluation of the Social Impacts of Sugarcane Growing on Municipalities in Brazil

The expansion of sugarcane growing in Brazil, spurred particularly by increased demand for ethanol, has triggered the need to evaluate the economic, social, and environmental impacts of this process, both on the country as a whole and on the growing regions. Even though the balance of costs and benefits is positive from an overall standpoint, this may not be so in specific producing regions, due to negative externalities. The objective of this paper is to estimate the effect of growing sugarcane on the human development index (HDI) and its sub-indices in cane producing regions. In the literature on matching effects, this is interpreted as the effect of the treatment on the treated. Location effects are controlled by spatial econometric techniques, giving rise to the spatial propensity score matching model. The authors analyze 424 minimum comparable areas (MCAs) in the treatment group, compared with 907 MCAs in the control group. The results suggest that the presence of sugarcane growing in these areas is not relevant to determine their social conditions, whether for better or worse. It is thus likely that public policies, especially those focused directly on improving education, health, and income generation/distribution, have much more noticeable effects on the municipal HDI.

Network Externalities in Developing Economies

This thesis contains three essays on microeconometrics, networks and economic development. In the first two essays I focus on developing country settings (Tanzania and Nepal respectively) to study how rural villagers form their social networks, and how the existence of these informal links impacts their welfare. The third essay focuses on the international trade of arms to investigate whether the political orientation of government in power makes any difference to arms export policy.

Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.