An analysis of the economic impacts of insecticide use in Arizona cotton

Published in 1979

This study measures economic impacts to representative large and small farms in Pinal County, Arizona, of a tax or standard that restricts per-acre insecticide use in cotton production. In contrast to previous studies, a variable damage function is incorporated into a dynamic economic model that more closely approximates actual insect-crop dynamics. An analysis is conducted comparing a constant damage function with the newly developed variable damage function. Comparisons of farm profits, optimal insecticide applications and optimal levels of insecticide use are made considering two controls, a tax, and a standard. Results show that, although the total restriction of insecticide is equal for both control actions, the standard incurs an efficiency cost from its implementation. A tax has no efficiency cost, yet significantly affects per-acre profits for the two farms. Policy makers are presented with a choice between an inefficient standard, which will negligibly affect long-run farm survival, or the efficient tax, which, in addition to reducing insecticide levels, generates a tax revenue for society. However, the effect of the tax on farm profits is enough to cause concern for the long-term survival of many farms. An analysis of constant versus variable damage functions shows significant differences in farm profits and optimal application rates. Results suggest that farm producers may be overapplying insecticide treatments throughout the cotton growing season.

AZU_TD_BOX300_E9791_1979_455.pdf (2.08 MB)

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