How Nonmarket Externalities Affect the U.S. Business Dynamism: An Economic Approach to Drug Epidemic
Abstract
Businesses thrive best in an environment devoid of constraints, including those resulting from third-party activities with longstanding economic underpinnings. While existing research has extensively explored how costs and benefits emanating from businesses affect third parties, in the form of market externality, little attention has been given to understanding how costs and benefits arising from third-party activities influence businesses. To fill this gap, this paper aims to introduce the concept of nonmarket externality, which represents the influence of third-party activities on businesses, and use it to examine whether third-party activities associated with the drug epidemic influence the U.S. business dynamism. The study utilizes Granger causality and Two Stage Least Square (2SLS) models for estimation. The results show that third-party activities associated with the drug epidemic significantly influence the U.S. business dynamism. These findings suggest that, given that the drug epidemic has longstanding economic underpinnings, addressing the drug epidemic requires incorporating an economic component into extant policies on the war on drugs. The study’s main implication is that tackling socioeconomic challenges with longstanding economic underpinnings such as drug epidemic may not be successful without incorporating an economic component into their policy design.
Recommended Citation
Ikwueze, Chukwudi
(2023)
"How Nonmarket Externalities Affect the U.S. Business Dynamism: An Economic Approach to Drug Epidemic,"
Pennsylvania Economic Review: Vol. 30:
No.
1, Article 4.
DOI: https://doi.org/10.65193/3067-8080.1027