Growth with Endogenous Risk of Biological Invasion
Edward B. Barbier
University of Wyoming - College of Business - Department of Economics and Finance
Jason F. Shogren
University of Wyoming - College of Business - Department of Economics and Finance
Economic Inquiry, Vol. 42, No. 4, pp. 587-601, October 2004
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 Classification: O13, O41, Q2
Accepted Paper Series
Suggested Citation
Barbier, Edward B. and Shogren, Jason F., Growth with Endogenous Risk of Biological Invasion. Economic Inquiry, Vol. 42, No. 4, pp. 587-601, October 2004. Available at SSRN: http://ssrn.com/abstract=616682
