Sustainable Finance in Europe

The European Union has a clear strategy on how sustainable development should be financed. However, there is still no regulation that defines which activities can be considered sustainable and which cannot. Private initiative has taken the lead in recent years with the publication of different taxonomies and principles applicable on a voluntary basis to green financial products and social projects. The EU taxonomy, issued in 2020, establishes criteria to determine whether an economic activity is environmentally sustainable, and the green bond standard is in the consultation period in 2021. The EU taxonomy will increase investor confidence in green financial products, prevent greenwashing, and reduce information costs. This chapter reviews the evolution and future application of the EU taxonomy, the EU green bond standard, and the need to adopt a taxonomy for socially sustainable activities.

Asymmetric Information, Transaction Costs, and Farmers Decision To Participate In Tobacco Voor-Oogst Kasturi Contract Farming

Contracts participation between tobacco farmers and traders is still low even benefit of contract is huge. This is related to factors that affect to the contract, demographics, farm characteristic, and other related factors. Contracts that initially became a tool to prevent market failure because it regulates how economic actors act against other, turns out to cause transaction costs as a result of asymmetric information that makes the contract does not function ideally. Therefore, this study attempts to explain asymmetry information during the transfer product and the potential transaction costs incurred using the New Institutional Economy approach. Beside that, this study also attemps to explain factors that underlie farmers decision making partnership, that were analized by using the analyst logistic regression.Respondents in this study were 100 respondents, 50 tobacco contract farmers, and 50 independent farmers from December 2018 through January 2019. The results showed that asymmetric information caused adverse selection and moral hazard, as many as 30% farmers had sold products to other parties and 8% of farmers had used pesticides that prohibited by traders. Contracts that are not ideal due to asymmetric information must be re-enforced by using additional costs called transaction costs which are divided into three typess, namely search and information costs, cost to design, negotiate and conclude and the monitor and contract enforcement costs. Monitoring costs have the potential to absorb the largest portion compared to other types of transaction costs. The greater the asymmetric information generated, the greater the transaction costs incurred. Then the factors that significantly influence the decision making of tobacco farmers to partnership are long time farming experience, land size, risk aversion level, certainty of price and source of capital.

Queueing Systems with Rationally Inattentive Customers

Problem definition: Classical models of queueing systems with rational and strategic customers assume queues to be either fully visible or invisible, while service parameters are known with certainty. In practice, however, people only have “partial information” on the service environment, in the sense that they are not able to fully discern prevalent uncertainties. This is because assessing possible delays and rewards is costly, as it requires time, attention, and cognitive capacity, which are all limited. On the other hand, people are also adaptive and endogenously respond to information frictions. Methodology: We develop an equilibrium model for a single-server queueing system with customers having limited attention. Following the theory of rational inattention, we assume that customers optimize their learning strategies by deciding the type and amount of information to acquire and act accordingly while internalizing the associated costs. Results: We establish the existence and uniqueness of a customer equilibrium when customers allocate their attention to learn uncertain queue lengths and delineate the impact of service characteristics. We provide a complete spectrum of the impact of information costs on throughput and show numerically that throughput might be nonmonotone. This is also reflected in social welfare if the firm’s profit margin is high enough, although customer welfare always suffers from information costs. Managerial implications: We identify service settings where service firms and social planners should be most cautious for customers’ limited attention and translate our results to advisable strategies for information provision and service design. For example, we recommend firms to avoid partial hindrance of queue-length information when a low-demand service is not highly valued by customers. For a popular service that customers value reasonably highly, however, partial hindrance of information is particularly advisable. Academic/practical relevance: We propose a microfounded framework for strategic customer behavior in queues that links beliefs, rewards, and information costs. It offers a holistic perspective on the impact of information prevalence (and information frictions) on operational performance and can be extended to analyze richer customer behavior and complex queue structures, rendering it a valuable tool for service design.

Neighborhood-Based Information Costs

We derive a new cost of information in rational inattention problems, the neighborhood-based cost functions, starting from the observation that many settings involve exogenous states with a topological structure. These cost functions are uniformly posterior separable and capture notions of perceptual distance. This second property ensures that neighborhood-based costs, unlike mutual information, make accurate predictions about behavior in perceptual experiments. We compare the implications of our neighborhood-based cost functions with those of the mutual information in a series of applications: perceptual judgments, the general environment of binary choice, regime-change games, and linear-quadratic-Gaussian settings. (JEL C70, D11, D82, D83, D91)

ANALISIS BIAYA TRANSAKSI USAHATANI PADI DI KECAMATAN BANGKINANG KABUPATEN KAMPAR

The rice plant is one of the agricultural products and is a major food for almost all the people of Indonesia. Farming capital is the production cost that will be spent by farmers during the production process. However, in addition to production costs, there are other costs unwittingly incurred by farmers which are also related to their farming activities. These costs are known as transaction costs. The purpose of this study was to analyze components and total transaction costs and the effect of transaction costs on economic efficiency of rice farming. The data were analyzed using descriptive qualitative and quantitative descriptive approaches. Transaction cost was analyzed by using transaction cost analysis. The results showed that the components of rice farming transaction costs along with their ratio consisting of information costs (0,05), negotiation costs (0,02), coordination costs (0,79), implementation costs (0,03), risk costs (0,08) and transportation costs (0,03). The effect of transaction costs on revenue was seen from the ratio value which wais equal to 0,009. Meanwhile, the factors that significantly affect transaction costs were farming experience and subscription.

Environmental Economics of Pollination

The pollination of crops by domesticated bees and wild pollinators is easily and often imagined as an accidental but essential process in agriculture. The notion that pollinators are overlooked despite their essential role in food production is widespread among the general public, as well as in policy debates concerning all issues related to pollinators, ranging from regulation of pesticides to conservation of habitat for wild bees, to support of beekeeping as an industry or as a hobby. Meade was the first to formalize this notion by making pollination a canonical example of beneficial externality in economics and arguing that subsidies should be established to ensure that honeybees are provided in optimal numbers to pollinate crops. In the first two decades of the 21st century, the same argument, but this time focusing on wild pollinators, has been proposed and supported by a large and growing literature in conservation ecology. However, a thorough review of contributions on the economics of pollination reveals several misconceptions behind the appealing fable of pollination externalities. The most striking rebuttal of Meade’s argument comes from the study of pollination markets, where beekeepers and crop growers engage in voluntary transactions called pollination contracts. A small economics literature formalizes the issue of incentives solved by these transactions and provides a detailed empirical analysis of many complex aspects, such as the establishment of standards for the monitoring of bee densities or the impact of seasonality of blooms and bee population dynamics on pollination prices. Outside pollination markets, economists have made rather sparse and partial contributions to several other important issues related to pollination in agriculture, such as valuation of pollination services, conservation of wild pollinators, and regulation of pesticides that impact pollinators. On these topics, studies have largely been published in non-economics journals and economists stand to make valuable contributions by applying and popularizing the concepts of incentive design, information costs, and other key insights of environmental economics in the study of pollination.

The Effect of Transaction Costs on The Benefits of Hybrid Maize Farming in Dompu District, West Nusa Tenggara

The characteristics of imperfect markets are characterized by the presence of transaction costs. One sector that is an imperfect market is the agricultural sector. The purpose of this study was to analyze the structure of transaction costs and the implications of transaction costs on the benefits of hybrid corn farming. The research method uses transaction cost analysis and multiple linear regression. The research was conducted in Dompu Regency, West Nusa Tenggara with 120 respondents as corn farmers. The results show that implementation costs are the component of transaction costs that have the highest percentage of 43.35%, then supervision costs are 28.37%, transportation costs are 20.61%, negotiation costs are 3.70%, information costs are 3.41% and coordination 0.57%. These transaction cost components are distributed in each hybrid corn farming cycle, among others; (1) birth cycle; (2) cropping cycle; (3) maintenance cycle; (4) supervision; (5) harvest cycle; and (6) postharvest cycle. The postharvest cycle is the cycle that has the highest percentage of 23.17%, then the maintenance cycle is 18.53%, the harvest cycle is 17.65%, the cropping cycle is 17.28% and the control cycle is 13.99%. Transaction costs have a positive and significant effect on the profits of hybrid corn farming.

Quantifying Legal Entropy

Many scholars have employed the term “entropy” in the context of law and legal systems to roughly refer to the amount of “uncertainty” present in a given law, doctrine, or legal system. Just a few of these scholars have attempted to formulate a quantitative definition of legal entropy, and none have provided a precise formula usable across a variety of legal contexts. Here, relying upon Claude Shannon's definition of entropy in the context of information theory, I provide a quantitative formalization of entropy in delineating, interpreting, and applying the law. In addition to offering a precise quantification of uncertainty and the information content of the law, the approach offered here provides other benefits. For example, it offers a more comprehensive account of the uses and limits of “modularity” in the law—namely, using the terminology of Henry Smith, the use of legal “boundaries” (be they spatial or intangible) that “economize on information costs” by “hiding” classes of information “behind” those boundaries. In general, much of the “work” performed by the legal system is to reduce legal entropy by delineating, interpreting, and applying the law, a process that can in principle be quantified.

Effect of Transaction Costs on Profit and the Capital Formation of Soybean Farming in Lamongan Regency, East Java

Transaction costs was one of imperfect market characteristic. The transaction costs of soybean farming affected profit level, and profit was one factor of capital formation. This research aimed to analyze the structure and the effect of transaction costs on the profitability and the capital formation of soybean farming. This study applied transaction cost analysis and simultaneous equation as the methods. The respondents were determined using simple random sampling by taking the proportion of 25% for the three selected districts, resulting in 120 respondents. The data were the transaction costs in 2014/2015 and household data from 2012 to 2014, comprising the assets of land, vehicles, farm equipment, crop, and livestock. The results revealed that the transaction costs were IDR 144,120.86. The negotiation costs became the highest cost component (60.30%), followed by information costs (14.07%), coordination costs (12.22%), implementation costs (8.03%), monitoring costs (4.23%) and risk costs (1.15%). Transaction costs had a significant effect on the profitability of soybean farming. The highest percentage of capital formation on soybean farming was for farmland, reaching 40.43%. Other capitals included vehicles (24.59%), plants (19.31%), building (7.37%), and supporting tools (3.09%). Transaction costs did not significantly effect on farming capital formation. As a recommendation, collective action was required, farmers should be active on farmers groups to reduce transaction costs.