Commercialization decisions and the economics of introduction |
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Authors: | Edward Barbier Duncan Knowler |
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Institution: | (1) Department of Economics and Finance, University of Wyoming, Department 3985, 1000 E University, Laramie, WY 82071-3985, USA;(2) School of Resource and Environmental Management, Simon Fraser University, 8888 University Drive, Burnaby, British Columbia, Canada, V5A 1S6 |
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Abstract: | Summary A commercial horticultural industry that establishes plant-breeding nurseries for an exotic species throughout a regional
economy will expand until the marginal profit of the last nursery established is zero. However, a regional government concerned
with social welfare will take into account not only the profits of the horticultural industry but also any expected costs
of an accidental invasion. The latter costs will consist of the discounted expected social damages due to an increase in the
rate of invasion over time and the increase in expected damage cost per hectare caused by an additional nursery. A government
can employ an “introducers' pay” tax equal to the latter social costs to ensure that the plant breeding industry establishes
the optimal number of nurseries. We illustrate this outcome with the example of purple loosestrife (Lythrum salicaria) in North America. In the absence of any tax, the horticultural industry will establish n = 3528 nursery operations, and the expected damages from invasion are US$ 28.2 million per year. With the tax, only n = 300 nurseries are established but the expected damages from invasion are reduced to US$ 1.3 million per year. Although
profits for the horticultural industry are lower from the tax, the net gains in overall social welfare more than offset the
losses. Although these results are illustrative only, they show that the problem of plant invasives initiated by commercial
operations is amenable to standard economic analysis and solutions, such as implementation of an “introducers' pay tax”. |
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Keywords: | biological invasions economics exotic species introducers' pay tax plant breeding purple loosestrife |
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