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Abstract
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 paths but that final time of pesticide use differs.
With these schemes, farmers have a tendency to switch to alternative pest-control technology,
as integrated pest management, 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.