Growth with Endogenous Risk of Biological Invasion

Edward B. Barbier () and Jason Shogren ()

Economic Inquiry, 2004, vol. 42, issue 4, pages 587-601

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 O13, O41, Q2) Copyright 2004, Oxford University Press.

JEL-codes: O13 O41 Q2 (search for similar items in EconPapers)
Date: 2004
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