Krekel & Zerrahn vs. Gehringer
You have two peer-reviewed articles, three required headings, a 1000-word minimum, and a 120-point grade on the line. This guide walks you through what to actually write under each heading, how to compare two articles that study very different externalities, and what the rubric is actually rewarding — which is economic theory mastery, not just summary.
Two articles. Three required sections. One grade worth 120 points. The mistake most students make with this assignment is treating it like a book report — summarise one article, summarise the other, add a few sentences saying they are different, and call it done. That approach misses the point entirely. The assignment is asking you to demonstrate that you understand externality theory well enough to put two empirical studies into conversation with each other and the broader literature. That is an economics skill, not just a writing skill.
What This Guide Covers
What Externalities Are in Economic Theory
Before you write a single word of summary, you need this concept locked down. An externality is a cost or benefit that spills over onto a third party who was not part of the original economic transaction. The classic formulation goes back to Arthur Pigou, whose 1920 work The Economics of Welfare identified that markets fail when private costs and social costs diverge — which is exactly what happens when an externality is present.
Negative Externality
A cost imposed on others without compensation. The polluting factory that damages downstream fisheries. The wind turbine that reduces quality of life for people living nearby. The private benefit to the turbine operator does not account for the well-being loss imposed on residents — so the market produces too many turbines relative to what is socially optimal.
- Also called external costs or diseconomies
- Lead to market overproduction of the harmful good
- Pigouvian taxes are one policy correction
- Relevant to: Krekel & Zerrahn (2017)
Positive Externality
A benefit conferred on others without compensation. The firm that invests in R&D creates knowledge that rival firms can adopt without paying for it. The originating firm captures only part of its investment’s value — the rest spills into the broader economy. Markets therefore underprovide R&D and knowledge creation relative to what is socially optimal.
- Also called external benefits or spillovers
- Lead to market underproduction of the beneficial good
- Subsidies and public funding are common corrections
- Relevant to: Gehringer (2016)
Market failure. Both papers are fundamentally about situations where the price mechanism does not capture all costs or benefits — so the market outcome is not socially optimal. Krekel and Zerrahn study a failure on the cost side (negative externality not priced in). Gehringer studies a failure on the benefit side (positive externality not fully captured). Your Compare/Contrast and Main Contribution sections will be much stronger if you frame both articles within this shared market failure framework.
Understanding Krekel & Zerrahn (2017)
Krekel and Zerrahn ask a pointed question: do wind turbines make people less happy? Not economically worse off in a measurable income sense — but less satisfied with their lives, which is a distinct and harder-to-price thing. Their approach is what makes the paper methodologically interesting.
Krekel, C., & Zerrahn, A. (2017) — Wind Turbines and Well-Being
Published in the Journal of Environmental Economics & Management, this paper uses panel data from a large German household survey to examine whether living near wind turbines reduces subjective well-being. The methodological contribution is applying a well-being valuation approach — using survey-reported life satisfaction as a proxy for utility — to measure an externality that has no obvious market price.
What they find: Proximity to wind turbines is associated with reduced subjective well-being, particularly for people living within one to two kilometres of a turbine. The effect persists even after controlling for income and other factors that affect life satisfaction. This means the turbines impose a real, measurable, but largely uncompensated cost on nearby residents — a classic negative externality. Crucially, the paper also finds that people who financially benefit from turbines (as co-owners or shareholders) do not show the same well-being loss — suggesting the externality is specifically about uncompensated exposure to the disamenity, not the turbine itself.Why this matters for your essay: The paper extends externality measurement beyond pollution and noise into the domain of subjective well-being — arguing that economic welfare includes more than just income and that traditional cost-benefit analysis may undercount the social costs of renewable energy infrastructure.
Understanding Gehringer (2016)
Gehringer is working in a completely different empirical context but the same theoretical space. The question is whether knowledge created in one sector of an economy spills over to other sectors — and whether that process differs depending on how open the economy is to trade.
Gehringer, A. (2016) — Knowledge Externalities in an Open Economy
Published in Technological Forecasting & Social Change, this paper examines knowledge spillovers across economic sectors using data from European countries. The central argument is that knowledge created through investment and innovation in one sector does not stay in that sector — it diffuses outward, benefiting other industries. This is a positive externality: the knowledge-generating firm or sector cannot capture all the returns from its investment.
What they find: Knowledge spillovers are real and economically significant, but their magnitude depends on how open an economy is. More open economies (greater trade integration) experience stronger knowledge diffusion across sectors. This adds an important dimension to spillover theory — the transmission mechanism matters, not just the existence of the externality. Import competition, foreign direct investment, and technology transfer all act as channels through which knowledge moves between sectors.Why this matters for your essay: The paper challenges a standard assumption in earlier spillover literature that knowledge diffuses uniformly. It argues that institutional and trade context shapes whether positive externalities are actually realised — which has direct policy implications for how governments should structure open-economy innovation policy.
How to Write Section 1: Summary of Major Findings
This is the most mechanical section of the essay. It is also where students lose easy points by being too vague. “The article studied externalities and found results consistent with the theory” is not a summary — it is a placeholder. Your professor needs to see that you understood what each paper actually found.
Allocate Roughly 200–250 Words to Each Article
With a 1000-word minimum spread across three sections, your Summary section should run 400–500 words total. Split it roughly evenly. Use a subheading or a clear paragraph break to separate your treatment of the two articles so the reader can track which summary is which.
Lead With the Research Question, Then the Method, Then the Finding
For Krekel and Zerrahn: state that they investigated the relationship between wind turbine proximity and subjective well-being using panel data from a German household survey, then report the finding (negative well-being effect for nearby residents, attenuated for financial stakeholders). For Gehringer: state that the study examined knowledge spillovers across sectors in open economies, then report what the data showed about how trade openness affects spillover magnitude.
Name the Type of Externality in Each Summary
Do not just describe what happened — name the economic concept. Krekel and Zerrahn document a negative externality imposed on residents living near wind turbines. Gehringer documents a positive knowledge externality that spills across sectors. Naming the concept shows the professor that you can apply theory to empirical findings, which is what the rubric rewards.
Do Not Lift Sentences From the Articles
The assignment explicitly prohibits direct copying. More than that — paraphrasing means actually reconstructing the meaning in your own sentence structure, not just swapping a few synonyms. If the original sentence is “proximity to turbines is associated with reduced life satisfaction,” your version should look like: “residents living close to wind turbines reported lower levels of personal well-being, even after other variables affecting life satisfaction were held constant.” Different structure, same meaning.
How to Write Section 2: Compare/Contrast
This is the hardest section and also the highest-value one. Most students list differences and leave it there. A strong Compare/Contrast shows what the differences mean — why it matters that one paper studied negative externalities and the other studied positive ones, not just that they did.
| Dimension | Krekel & Zerrahn (2017) | Gehringer (2016) |
|---|---|---|
| Type of Externality | Negative — uncompensated cost imposed on nearby residents | Positive — uncompensated benefit diffused across economic sectors |
| Domain | Environmental / social welfare — renewable energy infrastructure | Technological / economic growth — knowledge and innovation |
| Measurement Approach | Subjective well-being (life satisfaction surveys); non-market valuation | Sectoral productivity data; econometric analysis of trade and output |
| Geographic Scope | Germany — one country, regional variation in turbine siting | European economies — cross-country comparison, open economy focus |
| Policy Implication | Compensation mechanisms or siting restrictions for renewable energy projects | Policies that support trade openness and cross-sector knowledge diffusion |
| Market Failure Direction | Overproduction — market produces more turbines than is socially optimal | Underproduction — market generates less knowledge than is socially optimal |
| What They Share | Both demonstrate that private market transactions do not capture all social costs or benefits, confirming the core Pigouvian externality argument with modern empirical methods. | |
Both papers use empirical methods to measure externalities that earlier literature often addressed only theoretically. That is a shared methodological contribution worth naming in your Compare/Contrast section. Krekel and Zerrahn use survey-based well-being data — a relatively new approach in environmental economics. Gehringer uses cross-country panel econometrics. Neither is purely theoretical. Both are adding evidence to debates that previously relied more heavily on models and assumptions. That shared empirical orientation is as important as their differences.
Arthur Pigou’s foundational argument was that externalities create a wedge between private and social optima — and that this wedge justifies policy intervention. Krekel and Zerrahn’s wind turbine findings sit squarely in that tradition: the turbine operator’s private costs do not include the well-being losses imposed on residents, so the market over-supplies turbines relative to the social optimum. Gehringer’s knowledge spillover argument also follows Pigouvian logic in reverse: because knowledge creators cannot capture all the returns from their investment, the market under-supplies knowledge, requiring policy support. Framing both papers within this shared theoretical heritage — and then noting where each extends or complicates that heritage — is the move that earns full marks in the Compare/Contrast section.
How to Write Section 3: Main Contribution
This section asks a specific question: what did each article add to the literature that was not there before? It is not asking you to summarise the article again. It is asking you to position each article within the broader field — which means you need to know something about what the broader field already said.
Extending Externality Measurement Into the Domain of Subjective Well-Being
Traditional environmental economics measured externalities through property values (hedonic pricing), stated preferences (contingent valuation), or health outcomes. What Krekel and Zerrahn do is apply subjective well-being data — life satisfaction scores from household surveys — to quantify an externality. This matters because it captures welfare losses that do not appear in property markets or medical records: the general diminishment of life quality that comes from living next to an industrial structure.
How to frame this in your essay: Note that prior literature on wind turbine externalities relied primarily on property value studies (see Hoen et al., 2011, as a comparison point). Krekel and Zerrahn move the measurement technique forward — arguing that property values may not fully capture the disamenity effect because they are influenced by other factors and because renters (who face the same well-being loss) do not show up in hedonic property studies at all. The paper’s contribution is methodological as much as empirical.Conditioning Knowledge Spillovers on Trade Openness
The existence of knowledge spillovers — the idea that R&D and innovation create positive externalities that diffuse beyond the investing firm or sector — was well established before Gehringer. The work of Romer (1986) and Grossman and Helpman (1991) on endogenous growth and knowledge spillovers provided the theoretical foundation. What Gehringer adds is conditional logic: spillovers do not happen equally in all contexts. They depend on whether the economy is open to trade and how sectors are connected through trade flows.
How to frame this in your essay: The standard treatment of knowledge spillovers in the literature assumed that knowledge diffuses across an economy somewhat uniformly once created. Gehringer challenges that assumption by showing that the transmission mechanism — trade openness, import channels, sectoral linkages — shapes how much of the positive externality actually materialises. This shifts the policy conversation from “subsidise R&D” to “subsidise R&D and structure your trade environment to allow spillovers to diffuse.” The contribution is to the conditions under which positive externalities are realised, not just their existence.The rubric says the essay must “demonstrate mastery and accuracy of relevant economic concepts and theory.” In the Main Contribution section, that means using terms like market failure, Pigouvian externality, social welfare, welfare loss, deadweight loss, spillover effect, endogenous growth, and non-market valuation accurately and in context — not just as vocabulary insertions, but as concepts that explain why the articles matter. If you can say why each article’s approach is better or more complete than what existed before it, you are demonstrating mastery.
Meeting the 5-Source Requirement
The two assigned articles are two of your five. You need three more. All five must have an author name and a year of publication. Wikipedia and Investopedia are explicitly excluded. Here is how to find the remaining three without spending hours in a library database.
Where to Find the Other Three Sources
- Google Scholar — search “negative externalities renewable energy” or “knowledge spillovers open economy” and filter to peer-reviewed journals
- JSTOR — good for environmental economics and economics of innovation literature
- Your university library database — CBU’s library gives you access to EconLit, EBSCO, and others that index economics journals directly
- Look at the reference lists of Krekel and Zerrahn and Gehringer — their citations are already vetted peer-reviewed sources
Suggested Additional Sources to Look Up
- Pigou, A. C. (1920). The Economics of Welfare — foundational externality theory
- Romer, P. M. (1990). Endogenous technological change — Journal of Political Economy
- Grossman, G., & Helpman, E. (1991). Innovation and growth in the global economy — standard knowledge spillover reference
- Hoen, B., et al. (2011). Wind energy facilities and residential properties — hedonic study on turbine externalities in the US
- Coase, R. H. (1960). The problem of social cost — Journal of Law and Economics — alternative framework to Pigou
Wikipedia, Investopedia, any website without a named author, and any source without a year of publication are all explicitly prohibited by the assignment. News articles and blog posts also fall into this category even if they are from reputable outlets. If you are unsure whether a source qualifies, ask this: does it have an author name, a publication year, and was it published in a peer-reviewed journal or a credible academic press? If yes to all three, use it. If no to any of them, find something else.
APA Formatting for This Essay
The assignment references the Purdue OWL APA guide. Here are the specific requirements that trip students up on this type of comparative essay.
In-Text Citations: Author, Year, Page for Direct Quotes — Author, Year for Paraphrases
Since the assignment prohibits copying sentences directly, most of your citations will be paraphrase format: (Krekel & Zerrahn, 2017) or (Gehringer, 2016). If you quote a short phrase directly — which should be rare — add a page number: (Krekel & Zerrahn, 2017, p. 225). Use an ampersand (&) inside parentheses but spell out “and” in running text: “Krekel and Zerrahn (2017) found that…”
Reference List Entry Format for Journal Articles
Author, A. A., & Author, B. B. (Year). Title of article in sentence case. Journal Name in Title Case and Italics, volume(issue), page–page. Follow this format exactly. The journal name and volume number are italicised. The article title is not. Volume is italic; issue number in parentheses after the volume is not italic and has no space before it.
The Required Section Headings Are Level 1 APA Headings
APA Level 1 headings are centred, bold, and in title case. So your three section headings should appear as: Summary of Major Findings / Compare/Contrast / Main Contribution — centred on the page, bold, not underlined. The abstract and title page have their own formatting requirements per APA 7th edition, which the assignment specifies are not counted in the 1000-word minimum.
Word Count Includes Only the Body — Not Abstract, Title, or References
The assignment is explicit: 1000 words minimum, not including abstract, title page, and reference pages. That means your three body sections — Summary, Compare/Contrast, Main Contribution — need to total at least 1000 words combined. A rough split: 400 words for Summary (200 per article), 300–350 for Compare/Contrast, 300–350 for Main Contribution. That puts you at 1000–1100 words, which is the right target.
What Loses Points on This Rubric
Writing Summaries That Are Just Plot Descriptions
“The authors studied wind turbines and surveyed residents and found that the results showed negative effects.” This tells the professor nothing about your economic understanding. Name the type of externality, name the methodology, name the specific finding.
Anchor Every Summary Point to an Economic Concept
Krekel and Zerrahn document a negative externality in which the market price of renewable energy does not reflect the welfare costs imposed on nearby residents. The empirical method — subjective well-being data — is notable because it captures welfare losses that property markets and health studies do not.
Comparing Only Surface-Level Differences
“One article is about wind turbines and the other is about knowledge. They are different topics.” That is observation, not analysis. The rubric rewards economic reasoning — explaining what the differences mean for how we understand externality theory.
Compare the Theoretical Mechanisms, Not Just the Topics
Both papers identify market failures where private decisions do not account for social costs or benefits — but in opposite directions. Krekel and Zerrahn document overproduction relative to the social optimum; Gehringer documents underproduction. Both call for policy intervention, but the interventions point in opposite directions.
Main Contribution Section That Just Re-summarises the Articles
Restating what each article found is not the same as explaining what each article contributes to the literature. The professor knows what the articles found — they assigned them. The question is what these papers add that was not already in the field.
Position Each Article Against Prior Literature
Krekel and Zerrahn extend externality measurement beyond traditional hedonic pricing by introducing subjective well-being as a welfare metric — capturing disamenity effects that property markets may miss. Gehringer conditions knowledge spillover theory on trade openness, addressing a gap in standard endogenous growth models that assumed uniform knowledge diffusion.
Using Only the Two Required Articles as Sources
The minimum is five. Two articles plus zero additional sources equals a source requirement failure, regardless of how well the rest of the essay is written. This is an automatic deduction.
Use Additional Sources to Establish the Theoretical Context
Citing Pigou (1920), Romer (1990), or Grossman and Helpman (1991) in your Main Contribution section does two things: it meets the source requirement and it demonstrates that you know the theoretical literature these empirical papers are building on. Both things earn points.
Frequently Asked Questions
Business, finance & economics writing · Research paper writing · Critical analysis papers · Environmental science assignment help · Essay writing services · Literature review writing · Proofreading and editing
Before You Start Writing
Read both articles once for the big picture, then go back and read specifically for: the research question, the data source, the main finding, and one sentence describing what the authors say the paper adds to existing literature. That last part is usually in the introduction and conclusion. Write those four things down for each article before you open a blank document.
Then get your three additional sources in place. Do that before you draft — because the Main Contribution section will be hollow without them, and retrofitting citations after you have written 1000 words is frustrating.
The economics in these two papers is genuinely interesting once you see what connects them. Both are about the same underlying problem — the price mechanism failing to capture something real — just approached from opposite ends. An essay that makes that connection clearly and grounds it in theory will earn full marks.
Need Help With Your Economics Essay?
Our academic writing team supports economics and business students on comparative essays, APA-formatted research papers, critical analysis assignments, and full coursework packages.
Economics Writing Help Get Started