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The welfare impacts of an invasive species: Endogenous vs. exogenous price models

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  • McDermott, Shana M.
  • Finnoff, David C.
  • Shogren, Jason F.

Abstract

The “fixed-prices” models used to measure damages from invasive species typically overestimate financial impacts. These fixed-price assessments do not address key behavioral modifications that lower costs as people adapt by changing their mix of inputs and outputs given new economic circumstances. Using the invasive emerald ash borer (Agrilus planipennis) in Ohio as a motivating example, we develop a computable general equilibrium model that accounts for these behavioral responses. We estimate annual damages from the beetle to be about $70million, an order of magnitude less than the $400–$900million in damages estimated using a fixed-price model. Damages are lower because people adapt through price and income adjustments that occur after ash trees are devastated from the emerald ash borer.

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  • McDermott, Shana M. & Finnoff, David C. & Shogren, Jason F., 2013. "The welfare impacts of an invasive species: Endogenous vs. exogenous price models," Ecological Economics, Elsevier, vol. 85(C), pages 43-49.
    • Handle: RePEc:eee:ecolec:v:85:y:2013:i:c:p:43-49
    DOI: 10.1016/j.ecolecon.2012.08.020
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    References listed on IDEAS

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    1. Travis Warziniack & David Finnoff & Jonathan Bossenbroek & Jason Shogren & David Lodge, 2011. "Stepping Stones for Biological Invasion: A Bioeconomic Model of Transferable Risk," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(4), pages 605-627, December.
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    1. Jones, Benjamin A., 2016. "Work more and play less? Time use impacts of changing ecosystem services: The case of the invasive emerald ash borer," Ecological Economics, Elsevier, vol. 124(C), pages 49-58.
    2. Bauer, Dana Marie & Sue Wing, Ian, 2016. "The macroeconomic cost of catastrophic pollinator declines," Ecological Economics, Elsevier, vol. 126(C), pages 1-13.
    3. McDermott, Shana M. & Finnoff, David C. & Shogren, Jason F. & Kennedy, Chris J., 2021. "When does natural science uncertainty translate into economic uncertainty?," Ecological Economics, Elsevier, vol. 184(C).
    4. Bradshaw, Corey J.A. & Hulme, Philip E. & Hudgins, Emma J. & Leung, Brian & Kourantidou, Melina & Courtois, Pierre & Turbelin, Anna J. & McDermott, Shana M. & Lee, Katherine & Ahmed, Danish A. & Latom, 2024. "Damage costs from invasive species exceed management expenditure in nations experiencing lower economic activity," Ecological Economics, Elsevier, vol. 220(C).
    5. Hope, Emily S. & McKenney, Daniel W. & Pedlar, John H. & Lawrence, Kevin & MacDonald, Heather, 2021. "Canadian efforts to slow the spread of Emerald Ash Borer (Agrilus planipennis Fairmaire) are economically efficient," Ecological Economics, Elsevier, vol. 188(C).
    6. Brockmann, Stephanie & Finnoff, David C. & Mason, Doran M. & Rutherford, Edward S. & Zhang, Hongyan, 2024. "Consequences of ecological aggregation in general equilibrium analysis of perturbed ecosystems," Ecological Economics, Elsevier, vol. 218(C).
    7. Apriesnig, Jenny L. & Warziniack, Travis W. & Finnoff, David C. & Zhang, Hongyan & Lee, Katherine D. & Mason, Doran M. & Rutherford, Edward S., 2022. "The consequences of misrepresenting feedbacks in coupled human and environmental models," Ecological Economics, Elsevier, vol. 195(C).

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