Journal of Agricultural and Resource Economics
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Subsidies and fines are compared to voluntary and mandatory refuge insurance (insurance for pest damage on Bt corn refuge) as mechanisms for securing grower compliance with EPA refuge mandates. A conceptual model partially ranks mechanisms. Tradeoffs between mechanisms using grower welfare, payments to growers, and monitoring frequency are quantified empirically. Grower welfare is lowest with mandatory insurance because growers pay all costs, and is highest with direct refuge subsidies because public funds or companies subsidize all costs. Assuming typical premium loads and ignoring distribution considerations, we develop monitoring budgets for fines and subsidies, above which voluntary or mandatory insurance is better.
Genetically engineered crops offer farmers a new option for controlling pests. The high efficacy of these pesticidal crops, combined with the potential for widespread adoption, has raised concerns that pest resistance may prematurely diminish their value. In response to these concerns, the Environmental Protection Agency requires resistance management plans. Current resistance management plans rely on a high-dose refuge strategy. This analysis extends the current framework for evaluating high-dose refuge strategies to include a measure of agricultural productivity and conventional pesticide use. The economic tradeoff relative to agricultural productivity, conventional pesticide use, and pest resistance is assessed when Bt corn is planted to control the European corn borer.
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