Estimating the economic benefits of area-wide pest management: an extended framework with transport cost

Abstract

While transport cost is an important explanatory variable in determining trade patterns and flows, existing analyses have not yet considered it in evaluating the economic consequences of technical innovation such as area-wide pest management. In this paper, we extended Alston et al.’s (Science under scarcity: principles and practice for agricultural research evaluation and priority setting, 1995) framework by incorporating transport cost and applied the extended model to assess the Hawaii Area-Wide Fruit-Fly Integrated Pest Management Program. The study results indicate that ignoring transport cost could significantly overestimate the potential gains from this program and overestimate the proportion of the benefits obtained by producer. Hence, it is imperative to take into account the effects of transport cost in estimating the welfare consequences associated with the adoption of area-wide pest management, especially when such adoption causes substantial changes in production.