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National Center for Environmental Economics
Environmental Economics Reports
This study analyzes the relative effectiveness and efficiency of pest information and crop insurance programs in encouraging farmers to use potentially harmful pesticides more sparingly by eliminating wasteful applications. Possibly excessive applications of pesticides can be attributed to poor timing of applications and to the risk-averse behavior of farmers. Focusing on insecticide use in cotton production as a major policy problem, the study employs a decision-theoretic framework to simulate the farmer’s pesticide use decisions under alternative program options and subsidy levels. To the extent possible, empirical data are analyzed to complement the findings of the simulation analyses.
The theoretical and empirical analysis in this study indicate that pest information programs are potentially more effective than crop insurance programs in reducing insecticide usage. These reductions from compliance with pest control recommendations provided by information programs are associated with economic gains by the farmer. Both the simulation experiments and available evaluations of the USDA Pest Management Program indicate that a maximum insecticide use reduction of 30 percent can be achieved through information programs. Subsidies to such programs appear an effective means to encourage adoption by farmers, at least in the initial phases.
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