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Dynamic Pesticide Regulation under Resistance and Fiscal Constraints

Author

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  • Pantelis Kalaitzidakis

    (Department of Economics, University of Crete, Greece)

  • Vangelis Tzouvelekas

    (Department of Economics, University of Crete, Greece)

Abstract

Pesticide use generates dynamic externalities through resistance, health, and environmental channels, complicating the design of optimal regulation. We develop a dynamic framework in which pesticide use, resistance, and damages are jointly determined under a balanced-budget constraint. Resistance affects policy through two margins: it raises marginal external damages by amplifying effective exposure, but also reduces pesticide use, shrinking the fiscal base for intervention. This interaction creates a state-dependent gap between the Pigouvian benchmark and the constrained-efficient policy, which we term fiscal attenuation. We characterize the optimal tax-subsidy system and show that resistance both strengthens the case for taxation and shifts implementation toward non-chemical control. Simulations quantify the nonlinear interaction between resistance dynamics and fiscal capacity, highlighting the joint role of evolving damages and fiscal constraints in optimal environmental poli

Suggested Citation

  • Pantelis Kalaitzidakis & Vangelis Tzouvelekas, 2026. "Dynamic Pesticide Regulation under Resistance and Fiscal Constraints," Working Papers 2604, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:2604
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    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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