Should we internalize intertemporal production externalities in the case of pest resistance?

Pesticides efficiency decreases with their global application by farmers. Within a strategic dynamic framework, this results in a classic intertemporal production externality. We analyze tax and subsidy schemes that can be used in order to internalize this externality. We show that they are able to restore socially optimal solution at a given period of time but that final time of pesticide use differs. With these schemes, farmers have a tendency to switch to alternative pest-control technology earlier than is optimal. A lump-sum transfer is shown to be necessary to obtain a switching time equal to the socially optimal one, for the subsidy case only. Furthermore, the socially optimal switching time can be later than the one obtained under a situation without control.


Issue Date:
2013
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/153739
Total Pages:
36
JEL Codes:
Q10; Q3; H23; C73




 Record created 2017-08-04, last modified 2017-08-27

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