Date of Award:

5-2014

Document Type:

Dissertation

Degree Name:

Doctor of Philosophy (PhD)

Department:

Applied Economics

Committee Chair(s)

Arthur Caplan (Committee Co-Chair), Charles Sims (Committee Co-Chair)

Committee

Arthur Caplan

Committee

Charles Sims

Committee

Reza Oladi

Committee

Man-Keun Kim

Committee

James Powell

Abstract

Invasive species have caused notable economic damages in agriculture, fisheries, forestry, and other industries over the past several decades. Invasive species control must therefore be designed to prevent the both the introduction and spread of invasive species. This dissertation examines the efficiency and efficacy of tariffs and inspections as a joint control mechanism at a home (i.e., importing) country's border. I find that a traditional tariff can be optimal in the short run when the invasive species level is directly related to a foreign (i.e., exporting) country's shipment size. However, in the long run a traditional tariff results in a suboptimal industry size in the foreign country. When foreign countries can abate the invasive-species level prior to exportation, an additional tariff should be levied by the home country on the foreign country in order to induce the latter to choose the optimal abatement effort.

Next I discuss the case of uncertainty, where the invasive species contamination level is jointly determined by the foreign countries' abatement efforts and random environmental factors. The home country can no longer perfectly observe the foreign country's abatement efforts due to this randomness. A standard subsidy contract can nevertheless induce the foreign country to optimally abate the invasive species level (from the home country's perspective). However, the home country must offer a higher subsidy rate than the corresponding rate under perfect information in order to compensate a risk-averse foreign country. I also find that a standard tournament scheme between two competing foreign countries can be effective in attaining the home-country's first-best outcome when risk-averse foreign countries face both individualistic and common random environmental factors.

For the control of an established invasive species outbreak within a home country that consists of multiple spatially-connected individuals, I find that individualistic (i.e., uncoordinated) control is suboptimal. The key reason for this outcome is the existence of uncompensated benefits associated with individualistic control. Individual participants with small spatial scales are only concerned with their own limited damages, which are subset of the social damages. I also find that the more individuals, and the smaller the average parcel size, the larger is the steady-state invasion area. The configuration of small and large individual land parcels also influences the severity of the externality and the result of individualistic control. I show that a dynamic, multi-source subsidy scheme can be optimal in these circumstances.

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