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Optimal Border Policies for Invasive Species Under Asymmetric Information

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  • Linda Fernandez

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  • Glenn Sheriff

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Abstract

This paper analyzes the problem faced by a border protection agency if endogenous exporter abatement activities affect invasive species risk, allowing for unobservable differences in abatement cost. We show how the optimal inspection/penalty regime differs from the symmetric information case. Departing from previous literature, we allow for technical assistance, a policy instrument specifically permitted and commonly employed under Article 9 of the World Trade Organization Sanitary and Phytosanitary Agreement. We find the information asymmetry can make it optimal for the importing country to provide technical assistance grants for exporter risk abatement, even if it would otherwise be inefficient. Further, we show that fungibility of technical assistance with inputs in other sectors of the exporting economy affects the qualitative nature of optimal policy. If technical assistance has no outside value in the exporter’s country, optimal policy is characterized by a menu of contracts balancing higher tariffs with lower penalties for being caught with an invasive. If technical assistance can be used in other sectors of the exporter’s economy, it can introduce countervailing incentives making a uniform tariff/penalty combination optimal. Copyright US Government 2013

Suggested Citation

  • Linda Fernandez & Glenn Sheriff, 2013. "Optimal Border Policies for Invasive Species Under Asymmetric Information," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 27-45, September.
  • Handle: RePEc:kap:enreec:v:56:y:2013:i:1:p:27-45
    DOI: 10.1007/s10640-013-9637-z
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    References listed on IDEAS

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    1. Michael Margolis & Jason Shogren, 2012. "Disguised Protectionism, Global Trade Rules and Alien Invasive Species," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(1), pages 105-118, January.
    2. Burnett, Kimberly M. & D'Evelyn, Sean & Kaiser, Brooks A. & Nantamanasikarn, Porntawee & Roumasset, James A., 2008. "Beyond the lamppost: Optimal prevention and control of the Brown Tree Snake in Hawaii," Ecological Economics, Elsevier, vol. 67(1), pages 66-74, August.
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    1. repec:bla:ecorec:v:93:y:2017:i:301:p:277-301 is not listed on IDEAS
    2. Kaiser, Brooks A. & Bakanev, Sergey & Bertelsen, Rasmus Gjedsø & Carson, Marcus & Eide, Arne & Fernandez, Linda & Halpin, Patrick & Izmalkov, Sergei & Kyhn, Line A. & Österblom, Henrik & Punt, Maarten, 2015. "Spatial issues in Arctic marine resource governance workshop summary and comment," Marine Policy, Elsevier, vol. 58(C), pages 1-5.

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