Abstract

This paper examines the economic efficiency of insecticide use in the context of infectious vector-borne diseases. First, the use of insecticides is modeled as generating two externalities: a positive externality, derived from the protection of neighboring areas, and a negative externality, associated with pollution. We derive the private and social optimal use of insecticides, and propose a simple flat transfer that yields a second-best decentralized outcome. Second, the key parameters of the model are estimated for a serious infectious disease of the vine in France. The historical design of wine geographical indications is leveraged as an exogenous variation in insecticide use to identify their causal effect on infection. Our results indicate that the average producer privately underuses insecticides (with a benefit-cost ratio of approximately 3:1) and socially overuses them when the pollution cost is higher than =C70/ha/year. Finally, we run counterfactual policies suggesting that our flat transfer yields an equilibrium that is almost as efficient as the first-best spatial targeting of insecticide use.

Co-authors : Jean-Sauveur Ay et Estelle Gozlan

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