Externality

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Related to Positive externality: Negative externality

Externality

The cost or benefits of a transaction to parties who do not directly participate in it. Externality can be either positive or negative. For example, a merger can lead to higher share prices and bonuses for employees, benefiting shareholders and employees at the two companies merging, This can create wealth and positively impact a community. On the other hand, the merger can drive a competitor out of business, which results in layoffs and reduced wealth, which can hurt a community. Externality is also called spillover or the neighborhood effect. See also: External benefit, External cost.
References in periodicals archive ?
Alternatively, we could discuss a rancher who stops his cattle from roaming as conferring on the farmer the positive externality of preserved crops.
8) In addition, it has been widely accepted that without governmental intervention, firms underinvest in R&D because they internalize exclusively only a part of its benefits; R&D produces a positive externality in knowledge spillovers that can be used by others.
Taking all above positive externality effects together, what is the total effect of urban agglomeration on incomes?
On the other hand, widespread hatred of the targeted group would imply a positive externality from hate crime, because other people who share the perpetrator's hatred will also derive utility from the harm he inflicts on the victim, or a hate crime might generate a smaller negative externality than other crimes, because people outside the target group do not feel directly threatened.
This allegedly occurs because while the lower price is a negative externality for the horse breeders, buggy makers, and blacksmiths, it creates a positive externality for their customers (because the customers can now purchase horses and buggies at a lower price).
The positive externality argument is perhaps the most commonly cited justification for government involvement in education (Poterba, 1996).
The general increase in wealth created by those who pursue material gain can be thought of as a positive externality.
Therefore, the number of advertisements represents a positive externality for ad-lovers and a negative externality for ad-avoiders; besides, readers or viewers generate a positive externality on advertisers, as an advertisement has a higher impact if the audience is larger.
Generalising the original work of Balassa (1978), Feder (1982) measured the effect of positive externality of export sector on non-export sector and the productivity differential favouring the export sector in a typical neoclassical production function.
I have done less extensive research on this, but my preliminary observation is that the positive externality argument is debatable even at the primary and secondary level.
They argue that it is the positive externality generated from firm clustering in a specific location that attracts a firm to a specific location (Nachum 2000).

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