Externality

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Related to Negative externality: Positive 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 ?
Yet dropping out of this educational race would be the equivalent of sitting down at the concert while others continue standing; by sitting, a person would no longer be imposing a negative externality on others, but the harm imposed on him by those still standing would be greatly increased.
That is a loss of welfare for Palau as a whole and adds to the social cost of shark finning resulting in a negative externality. This phenomenon of added value in sharks from ecotourism is not solely in Palau.
The presence and effect of negative externalities in the energy sector are well documented, as pollution is a classic example of a negative externality responsible for market failure.
The choice to emphasize either the positive or negative externality in the mirrored set shapes the array of policy prescriptions we are likely to consider.
The intellectual underpinnings for the expansion of selective taxation of sin goods and other disfavored goods are built on a welfare economics argument--namely, that penalizing buyers and thereby controlling a negative externality will help to limit the production of these public "bads." However, the methodology for singling out negative externalities for taxation is ultimately a political game.
He rejects the Pigouvian framing of the problem in terms of "restraining the producer" of the negative externality:
For purposes of simplification, I consider only two categories of possible solutions to the negative externality caused by increased GHG emissions: a private-market, Coasian solution and public interventions through price-based or quantity-based regulation.
In particular, if consumption of a particular commodity leads to a negative externality, Pigou (1920) and Baumol (1972) suggest that those goods should be taxed at a higher rate.
Damping of factory waste in a water system can have a negative impact on those who rely on the water for drinking etc as they are in danger of poisoning (Negative externality).
A negative externality is the harm a contract inflicts on third persons who are not parties to the contract.
He also finds that the model recommended by the Commission should be revised to guarantee that non-participating countries will not suffer from a "negative externality" of the FTT (extraterritorial taxation and erosion of the tax base).