IDEAS home Printed from https://ideas.repec.org/a/eee/ecolec/v85y2013icp43-49.html
   My bibliography  Save this article

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

Author

Listed:
  • 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.

Suggested Citation

  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S092180091200417X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecolecon.2012.08.020?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Coupal, Roger H. & Holland, David W., 2002. "Economic Impact Of Electric Power Industry Deregulation On The State Of Washington: A General Equilibrium Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(1), pages 1-17, July.
    2. Holmes, Thomas P. & Liebhold, Andrew M. & Kovacs, Kent F. & Von Holle, Betsy, 2010. "A spatial-dynamic value transfer model of economic losses from a biological invasion," Ecological Economics, Elsevier, vol. 70(1), pages 86-95, November.
    3. 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.
    4. David Finnoff & Chris McIntosh & Jason F. Shogren & Charles Sims & Travis Warziniack, 2010. "Invasive Species and Endogenous Risk," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 77-100, October.
    5. Edward C. Waters & David W. Holland & Bruce A. Weber, 1997. "Economic Impacts of a Property Tax Limitation: A Computable General Equilibrium Analysis of Oregon's Measure 5," Land Economics, University of Wisconsin Press, vol. 73(1), pages 72-89.
    6. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
    7. Kovacs, Kent F. & Haight, Robert G. & McCullough, Deborah G. & Mercader, Rodrigo J. & Siegert, Nathan W. & Liebhold, Andrew M., 2010. "Cost of potential emerald ash borer damage in U.S. communities, 2009-2019," Ecological Economics, Elsevier, vol. 69(3), pages 569-578, January.
    8. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550, October.
    9. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335.
    10. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5, National Bureau of Economic Research, Inc.
    11. Pimentel, David & Zuniga, Rodolfo & Morrison, Doug, 2005. "Update on the environmental and economic costs associated with alien-invasive species in the United States," Ecological Economics, Elsevier, vol. 52(3), pages 273-288, February.
    12. Whalley, John, 1975. "How Reliable is Partial Equilibrium Analysis?," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 299-310, August.
    13. Edward B. Barbier, 2007. "Valuing ecosystem services as productive inputs [‘Valuing groundwater recharge through agricultural production in the Hadejia-Jama’are wetlands in northern Nigeria’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(49), pages 178-229.
    14. Finnoff, David & Tschirhart, John, 2008. "Linking dynamic economic and ecological general equilibrium models," Resource and Energy Economics, Elsevier, vol. 30(2), pages 91-114, May.
    15. Kent Kovacs & Thomas Holmes & Jeffrey Englin & Janice Alexander, 2011. "The Dynamic Response of Housing Values to a Forest Invasive Disease: Evidence from a Sudden Oak Death Infestation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 445-471, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. 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).
    3. 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).
    4. 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.
    5. Bauer, Dana Marie & Sue Wing, Ian, 2016. "The macroeconomic cost of catastrophic pollinator declines," Ecological Economics, Elsevier, vol. 126(C), pages 1-13.
    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).
    8. Corey J A Bradshaw & Philip E Hulme & Emma J Hudgins & Brian Leung & Melina Kourantidou & Pierre Courtois & Anna J Turbelin & Shana M Mcdermott & Katherine Lee & Danish A Ahmed & Guillaume Latombe & A, 2024. "Damage costs from invasive species exceed management expenditure in nations experiencing lower economic activity," Post-Print hal-04554467, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Finnoff, David & Tschirhart, John, 2008. "Linking dynamic economic and ecological general equilibrium models," Resource and Energy Economics, Elsevier, vol. 30(2), pages 91-114, May.
    2. Chang K. Seung & Michael G. Dalton & André E. Punt & Dusanka Poljak & Robert Foy, 2015. "Economic Impacts Of Changes In An Alaska Crab Fishery From Ocean Acidification," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 1-35, November.
    3. 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.
    4. Govinda R. Timilsina & Ram M. Shrestha, 2002. "General equilibrium analysis of economic and environmental effects of carbon tax in a developing country: case of Thailand," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 5(3), pages 179-211, September.
    5. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    6. Zhai, Fan, 2008. "Armington Meets Melitz: Introducing Firm Heterogeneity in a Global CGE Model of Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 575-604.
    7. Peichl, Andreas, 2008. "The benefits of linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 08-6, University of Cologne, FiFo Institute for Public Economics.
    8. Wolfgang Eggert & Andreas Haufler, 1998. "When Do Small Countries Win Tax Wars?," Public Finance Review, , vol. 26(4), pages 327-361, July.
    9. Keshab Bhattarai, 2017. "Welfare and Distributional Impacts of Financial Liberalization in an Open Economy: Lessons from a Multi-Sectoral Dynamic CGE Model for Nepal," International Business Research, Canadian Center of Science and Education, vol. 10(1), pages 181-198, January.
    10. Govinda Timilsina & Ram Shrestha, 2002. "General equilibrium analysis of economic and environmental effects of carbon tax in a developing country: case of Thailand," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 5(3), pages 179-211, September.
    11. Brücker, Herbert & Kohlhaas, Michael, 2004. "International Migration to Germany: A CGE-Analysis of Labour Market Impact," Conference papers 331276, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Boyd, Roy & Doroodian, Khosrow & Power, Amy, 1996. "The impact of removing the sugar quota on the U.S. economy: A general equilibrium analysis," Journal of Policy Modeling, Elsevier, vol. 18(2), pages 185-201, April.
    13. Michael FEIL, 2010. "Forecasting Medium-Term Distributional Effects of the Economic Crisis: A CGE-Microsimulation Approach," EcoMod2010 259600056, EcoMod.
    14. Bohringer, Christoph & Boeters, Stefan & Feil, Michael, 2005. "Taxation and unemployment: an applied general equilibrium approach," Economic Modelling, Elsevier, vol. 22(1), pages 81-108, January.
    15. Jan Brůha, 2002. "Aplikované modely všeobecné rovnováhy [Applied general equilibrium models]," Politická ekonomie, Prague University of Economics and Business, vol. 2002(3).
    16. Keshab Raj Bhattarai, 2007. "Capital Accumulation, Growth and Redistribution: General Equilibrium Impacts of Energy and Pollution Taxes in UK," Energy and Environmental Modeling 2007 24000005, EcoMod.
    17. Boyd, Roy & Uri, Noel D., 1994. "The effects of an increase in the motor fuels excise tax on the U.S. economy," Energy, Elsevier, vol. 19(2), pages 211-226.
    18. Tourinho, Octavio Augusto Fontes & Alves, Yann Le Boulluec & Silva, Napoleão Luiz Costa da, 2010. "Implicações Econômicas da Reforma Tributária: Análise com um Modelo CGE," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 64(3), September.
    19. Uri, Noel D. & Boyd, Roy, 1998. "Aggregate impacts of the proposed reduction in the motor fuels excise tax in the United States1," Energy Economics, Elsevier, vol. 20(3), pages 309-323, June.
    20. Isaac Dadson & Ryuta Ray Kato, 2015. "Remittances and the Redistributive Tax Policy in Ghana: A Computable General Equilibrium Approach," Working Papers EMS_2015_05, Research Institute, International University of Japan.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:85:y:2013:i:c:p:43-49. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolecon .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.