The Optimal Time to Remove Quarantine Bans Under Uncertainty: The Case of Australian Bananas
AbstractImport restrictions on biological materials are used widely as protection against exotic invasive pests and pathogens. While a scientific risk assessment is needed to justify an import ban under the WTO SPS Agreement, economics plays little role in determining the choice of import regime. Using a real option framework, we model the uncertain and irreversible costs from lifting an import ban and derive decision rules about the optimal timing, when ex ante research and development yields positive but uncertain benefits. The insights gained are applied to Australia's current import policy for bananas.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal Economic Record.
Volume (Year): 87 (2011)
Issue (Month): 276 (March)
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Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F18 - International Economics - - Trade - - - Trade and Environment
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- David Adamson & David Cook, 2007.
"Re-examining economic options for import risk assessments,"
Murray-Darling Program Working Papers
WP3M07, Risk and Sustainable Management Group, University of Queensland.
- Adamson, David & Cook, David, 2007. "Re-examining economic options for import risk assessments," Risk and Sustainable Management Group Working Papers 149869, University of Queensland, School of Economics.
- Ko, Chia Chiun & Frijters, Paul, 2014.
"When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies,"
IZA Discussion Papers
7988, Institute for the Study of Labor (IZA).
- Chia Chiun Ko & Paul Frijters, 2014. "When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies," Discussion Papers Series 502, School of Economics, University of Queensland, Australia.
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