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Insuring the Stewardship of Bt Corn: A Carrot Versus a Stick

Author

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  • Mitchell, Paul D.
  • Hurley, Terrance M.
  • Babcock, Bruce A.
  • Hellmich, Richard L.

Abstract

We compare subsidies and fines to voluntary and mandatory refuge insurance (insurance for pest damage on Bt corn refuge) as mechanisms for securing grower compliance with EPA refuge mandates. A conceptual model partially ranks mechanisms. We empirically quantify tradeoffs between mechanisms using grower welfare, payments to growers, and monitoring frequency. Grower welfare is lowest with mandatory insurance, since growers pay all costs, and highest with direct refuge subsidies, since public funds or companies subsidize all costs. Assuming typical premium loads and ignoring distribution considerations, we develop monitoring budgets for fines and subsidies, above which voluntary or mandatory insurance is better. Key words: biotechnology, European corn borer, refuge insurance, resistance management

Suggested Citation

  • Mitchell, Paul D. & Hurley, Terrance M. & Babcock, Bruce A. & Hellmich, Richard L., 2002. "Insuring the Stewardship of Bt Corn: A Carrot Versus a Stick," Staff General Research Papers Archive 10073, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:10073
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    References listed on IDEAS

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    Cited by:

    1. Ambec, Stefan & Desquilbet, Marion, 2006. "Pest Resistance Regulation and Pest Mobility," 2006 Annual meeting, July 23-26, Long Beach, CA 21134, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Mitchell, Paul D. & Zhu, En (John), 2003. "Moral Hazard And Bt Corn Refuge," 2003 Annual meeting, July 27-30, Montreal, Canada 22113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Matty Demont & Marie Cerovska & Wim Daems & Koen Dillen & József Fogarasi & Erik Mathijs & František Muška & Josef Soukup & Eric Tollens, 2008. "Ex Ante Impact Assessment under Imperfect Information: Biotechnology in New Member States of the EU," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 463-486, September.
    4. Paul D. Mitchell & Terrance M. Hurley, 2006. "Adverse Selection, Moral Hazard, and Grower Compliance with Bt Corn Refuge," Natural Resource Management and Policy, in: Richard E. Just & Julian M. Alston & David Zilberman (ed.), Regulating Agricultural Biotechnology: Economics and Policy, chapter 0, pages 599-623, Springer.
    5. Yang, Juan & Mitchell, Paul D. & Gray, Michael & Steffey, Kevin, 2007. "Unbalanced Nested Component Error Model and the Value of Soil Insecticide and Bt Corn for Controlling Western Corn Rootworm," Staff Paper Series 510, University of Wisconsin, Agricultural and Applied Economics.
    6. František KOCOUREK & Jitka STARÁ, 2012. "Efficacy of Bt maize against European corn borer in Central Europe," Plant Protection Science, Czech Academy of Agricultural Sciences, vol. 48(SpecialIs), pages 25-35.
    7. Marion Desquilbet & Markus Herrmann, 2016. "The Dynamics of Pest Resistance Management: The Case of Refuge Fields for Bt Crops," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 253-288, June.
    8. Stefan Ambec & Marion Desquilbet, 2012. "Regulation of a Spatial Externality: Refuges versus Tax for Managing Pest Resistance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(1), pages 79-104, January.

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