Budgeting and portfolio allocation for biosecurity measures

Tom Kompas, Long Chu, Pham Van Ha and Daniel Spring

Australian Journal of Agricultural and Resource Economics, 2019, vol. 63, issue 3, 412-438

Abstract: This paper presents a practical model for optimally allocating a budget across different biosecurity threats and measures (e.g. prevention or border quarantine, active surveillance for early detection, and containment and eradication measures) to ensure the highest rate of return. Our portfolio model differs from the common principle, which ranks alternative projects by their benefit cost ratios and picks the one that generates the highest average benefit cost ratio. The model we propose, instead, aims to allocate shares of the budget to the species where it is most cost‐effective, and consequently determine the optimal scale of the control program for each threat under varying budget constraints. The cost‐effectiveness of each block of budget spent on a threat is determined by minimising its expected total cost, including the damages it inflicts, and the control expenditures incurred in preventing or mitigating damages. As an illustration, the model is applied to the optimal allocation of a budget across four of Australia's most dangerous pests and diseases: red imported fire ants; foot‐and‐mouth disease; papaya fruit fly; and orange hawkweed. The model can readily be extended to consider more species and activities, and more complex settings including cases where detailed spatial and temporal information needs to be considered.

Date: 2019
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https://doi.org/10.1111/1467-8489.12305

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Journal Article: Budgeting and portfolio allocation for biosecurity measures (2019)
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