The North American horticultural industry and the risk of plant invasion


  • Research for this article was funded by financial support from the Program of Research on the Economics of Invasive Species Management (PREISM), the Economic Research Service (ERS) at the U.S. Department of Agriculture (under Cooperative Agreement 43-3AEM-5-80066). Earlier versions of this article were presented at the Western Economic Association International 83rd Annual Conference, Waikiki, Hawaii, June 29–July 3, 2008, the 2008 PREISM Workshop, USDA Economic Research Workshop, October 23–24, 2008, the 43rd Annual Conference of the Canadian Economics Association, May 29–31, 2009, University of Toronto, Ontario and the 17th Annual Conference of the European Association of Environmental and Resource Economists (EAERE), June 24–27, 2009, Amsterdam, The Netherlands, and the 11th BioEcon Conference, September 21–22, 2009, Venice, Italy. We are grateful for valuable comments provided by David Aadland, Bill Hahn, Lori Lynch, Charles F Mason, Donald M. McLeod, Jason F. Shogren, Alexandre Skiba, John Tschirhart, and Amos Zemel. We also benefited from the research assistance of Katie Barndt, Joanne Burgess, Kristin Dust, Arianne Ransom-Hodges, and Lizbeth Seebacher, and from the project assistance of Margie Reis. We thank the assistance at ERS provided by our project liaison, Daniel Pick, and also by Linda Calvin, Barney Caton, Robert Dismukes, Andy Jerardo, Craig Osteen, Craig Ramsey, and Donna Roberts. We are grateful to Gerald Shively and an anonymous referee for helpful comments.

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We develop a monopolistic competition model of the horticultural industry and estimate the resulting profit function with U.S. and Canadian industry data. Combining the results with a hazard analysis of the characteristics of exotic plants introduced in North America, we explore optimal tax simulations for internalizing the risk and costs of a potential plant invasion. If the share of the exotic plant sales in final profits is large, then the resulting annual fee will be high, discouraging the expansion of the nursery industry. However, the annual revenues could fund efforts to mitigate the damages resulting from any accidental plant invasion.