Growth with Endogenous Risk of Biological Invasion |
| |
| Authors: | Edward B Barbier Jason F Shogren |
| |
| Institution: | Barbier:;John S. Bugas Professor of Economics, Department of Economics &Finance, University of Wyoming, Department 3985, 162 Ross Hall, 1000 E. University Avenue, Laramie, WY 82071. Phone 1–307–766–2358, Fax 1–307–766–5090;E-mail Shogren:;Stroock Distinguished Professor of Natural Resource Conservation and Management, Department of Economics and Finance, University of Wyoming, Department 3985, 162 Ross Hall, 1000 E. University Avenue, Laramie, WY 82071. Phone 1–307–766–5430;Fax 1–307–766–5090;E-mail |
| |
| 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. |
| |
| Keywords: | |
|
|
