IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v56y2013i1p27-45.html
   My bibliography  Save this article

Optimal Border Policies for Invasive Species Under Asymmetric Information

Author

Listed:
  • Linda Fernandez
  • Glenn Sheriff

Abstract

This paper analyzes the problem faced by a border protection agency if endogenous exporter abatement activities affect invasive species risk, allowing for unobservable differences in abatement cost. We show how the optimal inspection/penalty regime differs from the symmetric information case. Departing from previous literature, we allow for technical assistance, a policy instrument specifically permitted and commonly employed under Article 9 of the World Trade Organization Sanitary and Phytosanitary Agreement. We find the information asymmetry can make it optimal for the importing country to provide technical assistance grants for exporter risk abatement, even if it would otherwise be inefficient. Further, we show that fungibility of technical assistance with inputs in other sectors of the exporting economy affects the qualitative nature of optimal policy. If technical assistance has no outside value in the exporter’s country, optimal policy is characterized by a menu of contracts balancing higher tariffs with lower penalties for being caught with an invasive. If technical assistance can be used in other sectors of the exporter’s economy, it can introduce countervailing incentives making a uniform tariff/penalty combination optimal. Copyright US Government 2013

Suggested Citation

  • Linda Fernandez & Glenn Sheriff, 2013. "Optimal Border Policies for Invasive Species Under Asymmetric Information," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 27-45, September.
    • Handle: RePEc:kap:enreec:v:56:y:2013:i:1:p:27-45
    DOI: 10.1007/s10640-013-9637-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10640-013-9637-z
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10640-013-9637-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Margolis & Jason Shogren, 2012. "Disguised Protectionism, Global Trade Rules and Alien Invasive Species," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(1), pages 105-118, January.
    2. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
    3. Burnett, Kimberly M. & D'Evelyn, Sean & Kaiser, Brooks A. & Nantamanasikarn, Porntawee & Roumasset, James A., 2008. "Beyond the lamppost: Optimal prevention and control of the Brown Tree Snake in Hawaii," Ecological Economics, Elsevier, vol. 67(1), pages 66-74, August.
    4. S. Andrew Starbird, 2005. "Moral Hazard, Inspection Policy, and Food Safety," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 15-27.
    5. Buhle, Eric R. & Margolis, Michael & Ruesink, Jennifer L., 2005. "Bang for buck: cost-effective control of invasive species with different life histories," Ecological Economics, Elsevier, vol. 52(3), pages 355-366, February.
    6. Christopher Costello & Carol McAusland, 2003. "Protectionism, Trade, and Measures of Damage from Exotic Species Introductions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 964-975.
    7. Batabyal, Amitrajeet A. & Beladi, Hamid, 2009. "Trade, the damage from alien species, and the effects of protectionism under alternate market structures," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 389-401, May.
    8. Lars J. Olson & Santanu Roy, 2005. "On Prevention and Control of an Uncertain Biological Invasion," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(3), pages 491-497.
    9. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
    10. Horan, Richard D. & Lupi, Frank, 2005. "Economic Incentives for Controlling Trade-Related Biological Invasions in the Great Lakes," Agricultural and Resource Economics Review, Cambridge University Press, vol. 34(1), pages 75-89, April.
    11. Benjamin M. Gramig & Richard D. Horan & Christopher A. Wolf, 2008. "Livestock Disease Indemnity Design When Moral Hazard Is Followed by Adverse Selection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 627-641.
    12. Mérel, Pierre R. & Carter, Colin A., 2008. "A second look at managing import risk from invasive species," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 286-290, November.
    13. Glenn Sheriff & Daniel Osgood, 2010. "Disease Forecasts and Livestock Health Disclosure: A Shepherd's Dilemma," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 776-788.
    14. Lars J. Olson & Santanu Roy, 2002. "The Economics of Controlling a Stochastic Biological Invasion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(5), pages 1311-1316.
    15. Mark Eiswerth & Wayne Johnson, 2002. "Managing Nonindigenous Invasive Species: Insights from Dynamic Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(3), pages 319-342, November.
    16. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    17. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    18. Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
    19. Kim, C.S. & Lubowski, Ruben N. & Lewandrowski, Jan & Eiswerth, Mark E., 2006. "Prevention or Control: Optimal Government Policies for Invasive Species Management," Agricultural and Resource Economics Review, Cambridge University Press, vol. 35(1), pages 29-40, April.
    20. Costello, Christopher & Springborn, Michael & McAusland, Carol & Solow, Andrew, 2007. "Unintended biological invasions: Does risk vary by trading partner?," Journal of Environmental Economics and Management, Elsevier, vol. 54(3), pages 262-276, November.
    21. McAusland, Carol & Costello, Christopher, 2004. "Avoiding invasives: trade-related policies for controlling unintentional exotic species introductions," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 954-977, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anthony Rossiter & Susan M Hester, 2017. "Designing Biosecurity Inspection Regimes to Account for Stakeholder Incentives: An Inspection Game Approach," The Economic Record, The Economic Society of Australia, vol. 93(301), pages 277-301, June.
    2. Kaiser, Brooks A. & Bakanev, Sergey & Bertelsen, Rasmus Gjedsø & Carson, Marcus & Eide, Arne & Fernandez, Linda & Halpin, Patrick & Izmalkov, Sergei & Kyhn, Line A. & Österblom, Henrik & Punt, Maarten, 2015. "Spatial issues in Arctic marine resource governance workshop summary and comment," Marine Policy, Elsevier, vol. 58(C), pages 1-5.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Burnett, Kimberly M. & D'Evelyn, Sean & Kaiser, Brooks A. & Nantamanasikarn, Porntawee & Roumasset, James A., 2008. "Beyond the lamppost: Optimal prevention and control of the Brown Tree Snake in Hawaii," Ecological Economics, Elsevier, vol. 67(1), pages 66-74, August.
    2. Carrasco, L.R. & Mumford, J.D. & MacLeod, A. & Knight, J.D. & Baker, R.H.A., 2010. "Comprehensive bioeconomic modelling of multiple harmful non-indigenous species," Ecological Economics, Elsevier, vol. 69(6), pages 1303-1312, April.
    3. Kimberly Burnett & Sittidaj Pongkijvorasin & James Roumasset, 2012. "Species Invasion as Catastrophe: The Case of the Brown Tree Snake," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(2), pages 241-254, February.
    4. Cook, David & Carrasco, Luis Roman & Paini, Dean & Fraser, Rob, 2011. "Estimating the social welfare effects of New Zealand apple imports," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(4), pages 1-22.
    5. Lovell, Sabrina J. & Stone, Susan F. & Fernandez, Linda, 2006. "The Economic Impacts of Aquatic Invasive Species: A Review of the Literature," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), pages 1-14, April.
    6. Jardine, Sunny L. & Sanchirico, James N., 2018. "Estimating the cost of invasive species control," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 242-257.
    7. Ollier, Sandrine & Thomas, Lionel, 2013. "Ex post participation constraint in a principal–agent model with adverse selection and moral hazard," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2383-2403.
    8. Haight, Robert G. & Polasky, Stephen, 2010. "Optimal control of an invasive species with imperfect information about the level of infestation," Resource and Energy Economics, Elsevier, vol. 32(4), pages 519-533, November.
    9. Bate, Andrew M. & Jones, Glyn & Kleczkowski, Adam & MacLeod, Alan & Naylor, Rebecca & Timmis, Jon & Touza, Julia & White, Piran C.L., 2016. "Modelling the impact and control of an infectious disease in a plant nursery with infected plant material inputs," Ecological Modelling, Elsevier, vol. 334(C), pages 27-43.
    10. Péter Eso & Balázs Szentes, 2004. "The Price of Advice," Discussion Papers 1416, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Péter Eső & Balázs Szentes, 2007. "The price of advice," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 863-880, December.
    12. Batabyal, Amitrajeet A. & Beladi, Hamid, 2009. "Trade, the damage from alien species, and the effects of protectionism under alternate market structures," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 389-401, May.
    13. Brocas, Isabelle, 2014. "Countervailing incentives in allocation mechanisms with type-dependent externalities," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 22-33.
    14. Araujo, Aloisio & Moreira, Humberto, 2010. "Adverse selection problems without the Spence-Mirrlees condition," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1113-1141, May.
    15. Noldeke,G. & Samuelson,L., 2004. "Decomposable principal-agent problems," Working papers 14, Wisconsin Madison - Social Systems.
    16. Noldeke, Georg & Samuelson, Larry, 2007. "Optimal bunching without optimal control," Journal of Economic Theory, Elsevier, vol. 134(1), pages 405-420, May.
    17. Mehta, Shefali V. & Haight, Robert G. & Homans, Frances R. & Polasky, Stephen & Venette, Robert C., 2007. "Optimal detection and control strategies for invasive species management," Ecological Economics, Elsevier, vol. 61(2-3), pages 237-245, March.
    18. Albers, Heidi J. & Fischer, Carolyn & Sanchirico, James N., 2010. "Invasive species management in a spatially heterogeneous world: Effects of uniform policies," Resource and Energy Economics, Elsevier, vol. 32(4), pages 483-499, November.
    19. David Martimort & Jérôme Pouyet & Francesco Ricci, 2018. "Extracting information or resource? The Hotelling rule revisited under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 311-347, June.
    20. Dalmazzone, Silvana & Giaccaria, Sergio, 2014. "Economic drivers of biological invasions: A worldwide, bio-geographic analysis," Ecological Economics, Elsevier, vol. 105(C), pages 154-165.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:56:y:2013:i:1:p:27-45. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.