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

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  • Elsa Martin

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.

Suggested Citation

  • Elsa Martin, 2013. "Should we internalize intertemporal production externalities in the case of pest resistance?," INRA UMR CESAER Working Papers 2013/4, INRA UMR CESAER, Centre d'’Economie et Sociologie appliquées à l'’Agriculture et aux Espaces Ruraux.
    • Handle: RePEc:ceo:wpaper:46
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    More about this item

    Keywords

    stock externality; pest resistance; technology change;
    All these keywords.

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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