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Insuring The Stewardship Of Bt Corn: 'A Carrot' Versus 'A Stick'

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

Subsidies and fines are compared 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. Tradeoffs between mechanisms using grower welfare, payments to growers, and monitoring frequency are quantified empirically. Grower welfare is lowest with mandatory insurance because growers pay all costs, and is highest with direct refuge subsidies because 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.

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File URL: http://purl.umn.edu/31127
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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 27 (2002)
Issue (Month): 02 (December)
Pages:

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Handle: RePEc:ags:jlaare:31127
Contact details of provider: Web page: http://waeaonline.org/

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  1. Thomas L. Marsh & Ray G. Huffaker & Garrell E. Long, 2000. "Optimal Control of Vector-Virus-Plant Interactions: The Case of Potato Leafroll Virus Net Necrosis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 556-569.
  2. Pollak, Robert A. & Wales, Terence J., 1991. "The likelihood dominance criterion : A new approach to model selection," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 227-242, February.
  3. David A. Hennessy, 1997. "Damage Control and Increasing Returns: Further Results," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 786-791.
  4. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk and Probability Premiums for Cara Utility Function," Staff General Research Papers 596, Iowa State University, Department of Economics.
  5. Atanu Saha & C. Richard Shumway & Arthur Havenner, 1997. "The Economics and Econometrics of Damage Control," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 773-785.
  6. J. Pannell, David, 1991. "Pests and pesticides, risk and risk aversion," Agricultural Economics, Blackwell, vol. 5(4), pages 361-383, August.
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