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Growth with Endogenous Risk of Biological Invasion

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  • Edward B. Barbier
  • Jason F. Shogren

Abstract

We model biological invasions as an unintended by-product of capital accumulation. We distinguish three spillover effects: (1) a negative production externality, (2) a negative or positive consumption externality and (3) an increase in the risk of future welfare loss. We also consider the implications when households self-protect by allocating income to reduce the potential damages from a biological invasion. An optimal output tax for production externalities is straightforward and can be augmented in the case of negative or positive spillover effects on consumer welfare. Policies to correct the effect of invasions on endogenous risk are more difficult to design. (JEL O13, O41, Q2) Copyright 2004, Oxford University Press.

Suggested Citation

  • Edward B. Barbier & Jason F. Shogren, 2004. "Growth with Endogenous Risk of Biological Invasion," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 587-601, October.
    • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:4:p:587-601
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    File URL: http://hdl.handle.net/10.1093/ei/cbh083
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    Citations

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    Cited by:

    1. Maria Sandsmark & Haakon Vennemo, 2007. "A portfolio approach to climate investments: CAPM and endogenous risk," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(4), pages 681-695, August.
    2. Burnett, Kimberly M. & Kaiser, Brooks A. & Pitafi, Basharat A.K. & Roumasset, James A., 2006. "Prevention, Eradication, and Containment of Invasive Species: Illustrations from Hawaii," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), pages 1-15, April.
    3. Shogren, Jason F. & Finnoff, David C. & McIntosh, Christopher R. & Settle, Chad, 2006. "Integration-Valuation Nexus in Invasive Species Policy," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), pages 1-10, April.
    4. Olson, Lars J., 2006. "The Economics of Terrestrial Invasive Species: A Review of the Literature," Agricultural and Resource Economics Review, Cambridge University Press, vol. 35(1), pages 178-194, April.
    5. Fenichel, Eli P. & Horan, Richard D. & Bence, James R., 2010. "Indirect management of invasive species through bio-controls: A bioeconomic model of salmon and alewife in Lake Michigan," Resource and Energy Economics, Elsevier, vol. 32(4), pages 500-518, November.
    6. An-Sing Chen & Hui-Jyuan Gao & Mark Leung, 2008. "Is Trading Imbalance a Better Explanatory Factor in the Volatility Process? Intraday and Daily Evidence from E-mini S&P 500 Index Futures and Information-Based Hypotheses," Working Papers 0039, College of Business, University of Texas at San Antonio.
    7. Batabyal, Amitrajeet A. & Beladi, Hamid, 2009. "Trade, the damage from alien species, and the effects of protectionism under alternate market structures," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 389-401, May.

    More about this item

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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