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Economic Effects of Mitigating Apple
Maggot Spread
Zishun Zhao,1Thomas Wahl2and Thomas Marsh3
1School of Economic Sciences, IMPACT Center, Washington State University, 123 Hulbert
Hall, PO Box 646214, Pullman, WA 99164-6214 (phone: (602) 537-8638;
fax: (602) 537-9244; e-mail: zishun@wsu.edu).
2School of Economic Sciences, and director of IMPACT Center, Washington State
University.
3School of Economic Sciences, IMPACT Fellow, Washington State University.
Apple maggotis an economically important apple pest that is native to the East Coast of North America,
including Canada and the United States. Introduced to the West Coast of the United States in 1979,
the pest is spreading rapidly in the region, threatening the major apple production area of Washington
State, as well as British Columbia. A dynamic simulation model for perennial fruit production is
developed to study the potential economic impact of a pest species, such as apple maggot. The model is
designed to provide essential information, including the intertemporal distribution of welfare, to aid the
design of effective and efficient policy response to pest outbreaks. This model is used to simulate the
economic impact of apple maggot spread in Washington State on apple price, trade flows, and welfare
changes.
La mouche de la pomme est un ravageur originaire de la cˆ
ote Est de l’Am´
erique du Nord (canadienne
et ´
etatsunienne) qui cause des pertes ´
economiques consid´
erables. Ce ravageur, qui s’est introduit sur la
cˆ
ote Ouest des ´
Etats-Unis en 1979, se propage rapidement et menace les principales zones de production
de pomme de l’ ´
Etat de Washington et de la Colombie-Britannique. Nous avons ´
elabor´
e un mod`
ele de
simulation dynamique pour la production pluriannuelle de fruits afin d’´
etudier l’incidence ´
economique
potentielle d’esp`
eces ravageuses telles que la mouche de la pomme. Le mod`
ele a ´
et´
e conc¸u pour fournir
de l’information essentielle, dont la distribution du bien-ˆ
etre intertemporel, en vue de contribuer `
a
l’´
elaboration d’une r´
eaction politique efficace de lutte contre les pullulations de ravageurs. Ce mod`
ele
est utilis´
e pour simuler l’incidence ´
economique de la propagation de la mouche de la pomme dans l’ ´
Etat
de Washington sur le prix des pommes, le flux des ´
echanges commerciaux et les changements touchant
le bien-ˆ
etre.
INTRODUCTION
Apple maggot (Rhagoletis pomonella) is an economically important apple pest that is
native to the East Coast of North America, in both Canada and the United States. It
infests apples, pears, plums, apricots, hawthorns, and crabapples. In response, quarantine
areas have been established where apple maggot populations are known to exist. In
addition to quarantine costs, other immediate direct costs (e.g., decreased fruit quality
and yield) and increased production costs (e.g., pest control) are incurred, as well as
economic cost due to restricted opportunities in domestic and international markets.
An apple maggot typically has one generation per year during which they can damage
fruit with a life cycle of egg, larva, pupa, then adult. The apple maggot spends the winter
in a pupal stage, then emerges for reproduction from July through September. The apple
Canadian Journal of Agricultural Economics 55 (2007) 499–514
499
500 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
maggot causes two forms of injury that affect the fruit. The first type is when the flesh
surrounding a puncture where eggs are deposited in immature fruit often fails to grow
with the rest of the apple and becomes a sunken, dimple-like spot on the surface. And
the second type of injury is when the larvae feed and move through the fruit, leaving a
characteristic brown trail through the flesh of the apple that can readily be seen when
the fruit is cut open. Yield damage also arises as injured apples usually drop prematurely.
If left untreated, orchards infected with apple maggot could lose 30–70% of their total
production (Howitt 1993).
Apple maggot was first discovered on the West Coast in the Portland, Oregon, area
in 1979 (Bush et al 2005). Since then it has spread and infested apples in many parts of
California, Washington, and Idaho. Apple maggot is established in 17 western Washington
counties, and in Kittitas, Klickitat, Skamania, and Spokane counties in central and eastern
Washington. It is suspected that the apple maggot is transported and spread as maggots or
eggs within infested fruit. To prevent apple maggots from spreading to other counties, local
authorities rely on early detection and immediate eradication programs. Quarantine areas
are established around counties that have known apple maggot infestations. Washington
State Department of Agriculture (WSDA) and local horticultural pest and disease boards
monitor apple maggots throughout Washington State.
Washington State is the number one apple-producing state in the United States,
accounting for 65–75% of all apples sold in the fresh market (Economic Research Services,
USDA 2004). Consequently, the spread of apple maggot could cause serious economic
impacts. The establishment of apple maggot in a region tends to raise production costs.1
The spread of apple maggot also affects export markets. Canada, Chile, China, Mexico,
and Taiwan are either apple maggot free or have established apple maggot–free zones
and have adopted technical barriers for apple import from apple maggot infested states
(Krissoff et al 1997). For example, to reduce the risk of apple maggot invasion, Canada
requires all apples shipped to British Columbia to be certified as coming from an apple
maggot–free area or undergo costly cold treatment. Loss of apple maggot–free status
will lead to reduced exports and significantly increase exporting costs. The magnitude
of this impact is reflected in the recent experience with Mexico. Mexico requires that all
apple imports from the United States undergo cold treatment to prevent the introduction
of apple maggot, which is estimated to be equivalent to a 20–30% tariff (Krissoff et al
1997).
In addition to the immediate and short-term economic impact, an outbreak of apple
maggot, and the measures taken to mitigate it, could also have medium- to long-term
economic implications. The long life cycle of apple trees tends to make suppliers less
responsive to market prices in the short term. However, sudden shocks to the production
system can cause wide fluctuations in fruit markets. For example, the Chinese government
encouraged apple production and heavy investment in an effort to promote the apple
industry in the early 1990s. Subsequently, an oversupply of fresh apples, beginning in
1999, caused a disastrous plunge in apple prices in the years to follow. This low price has
resulted in a sharp reduction in the acreage of apple trees after 2003. Consequentially,
the drop in apple production left apple juice processors short on inputs. China’s example
shows that, while the effects on welfare and price of a crisis or policy are only partially
evident in short-term market outcomes, the ripple effect over the long term may yield a
more substantial economic impact.
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 501
Because of the public good nature of the problem, prevention and mitigation of
apple maggot includes government involvement. In the design and implementation of
government involvement and policies, it is important to efficiently allocate scarce re-
sources (private and public). In the meantime, it is essential to balance public efforts
with cooperation from private orchard owners to provide more effective policies. Thus, a
comprehensive understanding of the economic impact, including total welfare changes,
welfare distributional effects, and intertemporal effects, of an outbreak and measures
taken to mitigate the problem is the key to designing efficient and effective responses
to emergencies, such as an outbreak of apple maggot. Indeed, the importance of stock
dynamics in economic analysis of biological invasion and policy response have been
recognized and emphasized in recent literature.2
To evaluate the economic impact of apple maggot introduction and spread, we have
developed a partial-equilibrium, dynamic simulation model for perennial fruit production
in an open economy. Biological modeling components include population dynamics of
fruit trees and dissemination dynamics of the pest. The economic component of the model
is designed to accommodate multiple regions that differentiate between characteristics in
production and pest infestation. This model provides the capability of evaluating the
economic impact to international trade, producer welfare in infested as well as pest-
free regions, and welfare and distributional effects over short-, medium-, and long-run
scenarios. Implementation of apple production with apple maggot invasion in Washington
State serves as an empirical application of the model.
CONCEPTUAL FRAMEWORK
Conceptually, it is assumed that a fruit grower maximizes expected profit subject to
tree population dynamics and other production constraints. Yield and production costs
depend on the state of the production system and environment. In the context of a
biological invasion, a grower’s production environment is determined by whether or not
the orchard is infested with a particular pest. An orchard’s infestation is influenced by
the dynamics of pest dissemination, as well as mitigation strategies that can modify the
process.
Fruit products are sold in domestic and international markets. Domestic growers
compete in these markets and with imported fruits in domestic markets. As discussed
above, pest infestations can disrupt domestic and international markets. Trade also pro-
vides important pathways for spreading invasive species. Hence, it is an important com-
ponent of the modeling framework. Components of the model framework are explained
in detail in the following sections, including the bioeconomic production model, markets
and market-clearing conditions, and invasive species dissemination.
Population Mechanics and Production
The process of perennial fruit production consists of a productive population that evolves
according to its biological features and to grower’s decisions that adjust the population
stocks. In fruit production there is often a long lag between investment decision and
revenue generation due to the time required for a tree (or group of trees) to reach its
productive stage. Most fruit species require several years before they can begin to effi-
ciently bear fruit. This time period will vary depending on several factors, such as species,
502 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
rootstock, density, climate condition, etc. Thus, tracking the total planting area of trees
by age is essential to generate total supply. Hence, we differentiate the stock of productive
planting area by tree age. Each age group evolves according to the following equations:
Kj+1
t+1=Kj
t−RMj
t(1.a)
K0
t=NPt(1.b)
where Kj
tis the total area of age jtrees at time t,RM
j
tis the area to be removed from the
stock of age jtrees at time t, and NPtis the area of newly planted trees. Any planting area
not chosen for removal during the current period progresses into the stock of the next age
group.
We assume fruit is the only output produced in the industry, with production in each
year given by
FPt=
u
j=0
yjKj
t(2)
where FP is the total fruit production, yjis the yield per acre of age jtrees and uis the
upper boundary on productive age. The total production supplies are intended for both
export and domestic markets. The domestic supply (SDt)isthengivenby
SDt=FPt+M
t−Et(3)
where Etand Mtare exports and imports, respectively.
Optimization Problem
For our analysis, we assume that the fruit grower has a single objective: to maximize the
total present value of all future profits. Standard controls for the grower are the addition
to, and subtraction from, the productive stock of trees (orchard); effective management of
production inputs (such as tree density at establishment of orchard, fertilizer, pesticides,
etc.); and the selective administration of labor for the differentorchard operations (such as
pruning, fruit thinning, and harvest). When the day-to-day orchard management system
is exogenously given or predetermined, the representative grower’s problem with regard
to a particular block of land (with or without trees) is essentially an investment decision.
If the total expected and discounted present value of cash flow of the best alternative
management system is higher than zero, it is profitable to keep the trees on that block
or to plant an additional block of trees. The total area of trees is then determined by
the marginal grower whose expected net profit is exactly zero. To accommodate various
boundary conditions, we model the inventory update problem as a mixed complementary
problem.
It is assumed that fruit growers make their decision based on expected profits, and
that the only source of revenue is from selling fruit. Let Et(Pt+l) be the price expectation
of time t+lbased on information available at time tand let βbe the rate of time
preference. The total expected revenue is ∞
i=0[βi(Et(P
t+i)u
j=0yjKj
t+i)]. Total expected
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 503
cost consists of capital cost, labor cost, material cost, planting cost, and removal cost.
For simplicity, we use three cost terms: planting cost for new trees, PC; maintenance cost,
MC; and removal cost, RC. The planting cost includes preparation of land, planting, and
purchasing necessary equipment. Planting cost is specified as increase in acreage of new
plantings:
PCt=pcK0
t,pc>0(4)
It was also assumed that the maintenance cost increases in total acreage to ac-
commodate the diminishing marginal return and increasing marginal cost, expressed as
follows:
MCj
t=mcj
u
j=0
Kj
t
,mc
j>0,1≤j≤u(5)
Removal cost RC is fixed over time. Hence, the total cost over the planning horizon
is
TC =
∞
i=0
βi
PCt+iNPt+i+
u
j=1MCj
t+iKj
t+i+RC ·RMj
t+i
Combining the components above the representative grower’s problem optimization,
with respect to newly planted tree area and removed tree area decisions, is
Max
NPt+i,RM j
t+i
∞
i=0
βi
EtP
t+i
u
j=0yjKj
t+i
−
PCt+iNPt+i+
u
j=1MCj
t+iKj
t+i+RC ·RMj
t+i
s.t.(a) Kj+1
t+1=Kj
t−RMj
t
(b) K0
t=NPt
(c) NPt≥0
(d) 0 ≤RMj
t≤Kj
t
(e) RMu
t=Ku
t
(6)
Under perfect competition (i.e., the representative grower takes price and cost as
given), the Kuhn–Tucker conditions are
u−j
l=1
βlEt(P
t+l)yj+l−
u−j
l=1
βlMCj+l
t−βu−jRC ≥−RC ⊥RM j
t≥0∀j≥1 (7.a)
504 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
u
l=1
βlEt(P
t+l)yl−
u
l=1
βlMCl
t−βuRC ≤PC ⊥NPt≥0 (7.b)
For ease of discussion, let PVI j
t=u−j
l=1βl(Et(P
t+l)yj+l) denote the present value of
all cash inflow generated by an acre of fruit trees, and PVO j
t=u−j
l=1βlMCj+l
t+βu−jRC
denote the present value of all cash outflow for the same acre. Then the optimality
conditions can be expressed as
PVIj
t−PVOj
t≥−RC ⊥RMj
t≥0∀j≥1 (8.a)
PVI0
t−PVO0
t≤PC ⊥NPt≥0 (8.b)
The set of optimality conditions expressed in Equations (8.a) and (8.b) are the first-
order Kuhn–Tucker conditions with complementary boundary conditions on the choice
variables.3
It is clear that the optimality conditions are essentially a set of investment decisions.
The first condition implies that if leaving an acre of trees on a block of land is more
profitable than removing it now, then the age jtrees should not be removed; on the other
hand, if some but not all of the trees are removed, then it must be true that leaving the
acre of trees as they are is as profitable as removing them now; if all of the trees are
removed, keeping the trees must be less or equally profitable as removing them. The
second condition deals with new plantings. If a positive amount is planted, then it must
be true that the expected profit from planting new trees is zero; if the profit from planting
new trees is negative, then no new trees would be planted.
Markets and Market-clearing Prices
Fruit markets provide the grower with information to form their expectations. To capture
the potential impact of an invasive species outbreak, both domestic and international
markets are included. Domestic demand for fruit is defined using inverse demand rela-
tionships. Let Dtbe the demand for fruit,P
tbe the price, and INtbe the income. Domestic
demand for fruit in price-dependent form can be expressed as
P
t=d(Dt,INt)(9)
Assuming that the exchange rate is fixed over time, the export demand for fruit is a
function of the domestic price plus tariff, or the tariff equivalent of trade barriers:
Et=ed(P
t+TFt) (10)
The import demand for foreign fruit products, if the imported fruit and domestically
produced fruit are homogeneous, is also a function of the domestic price
M
t=md(P
t) (11)
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 505
In a perfectly competitive market, the equilibrium price is given by solving the
market-clearing condition (Varian 1992):
FPt+M
t=Dt+Et(12)
In general, both imports and exports can be segmented into countries or trade regions
to better accommodate alternative trade policies and bilateral agreements.
In summary, Equations (1)–(12) completely describe a partial equilibrium system for
dynamic fruit production and consumption. The model was kept as general as possible
so that it could be adapted to model different species of perennial fruit production in
an open economy. Given yields, costs, demand equations, and starting inventories for
a specific fruit species and corresponding production system, the model can simulate
production and consumption responses to various shocks to domestic and international
markets. Coupling the above framework with an invasive species dissemination mecha-
nism (discussed ahead), it can also be used to evaluate the potential economic impact of an
invasive species outbreak that affects production and markets and to evaluate alternative
mitigation policies.
Invasive Species Introduction and Dissemination
Upon establishment of an invasive pest species, production is differentiated into infested
and noninfested areas, according to changes in the production environment. Production
in the infested area is assumed to be more costly, reflecting the cost of controlling the
pest. As the pest populate spreads, the inventory makes the transition from a noninfested
to infested status. Production cost or yield can be modified accordingly. Transition from
a noninfested to infested region is dictated by the speed of the invasion for a particular
pest.
To model the spread of an invasive pest species, we choose to use the population front
advance model proposed by Sharov and Liebhold (1998). In this model, the population
front of a pest species, or the boundary between the infested and noninfested area,
advances linearly at a constant speed. The speed at which a population front advances is
governed by the equation
cn0V
r2expr
V−r
V−1=κ(13)
where cis the rate at which new colonization is established, κis a colony’s carry-
ing capacity, n0is the initial number of individuals in a colony, ris the intrinsic
growth rate, and Vis the relative speed of population front advance.4This model
provides a linkage between mitigation effort and the spread speed. The population
spread can be slowed/stopped through reducing/preventing the establishment of new
colonies.
SIMULATION OF APPLE MAGGOT SPREAD IN WASHINGTON STATE
As indicated by the different production costs that can arise upon establishment of an
invasive pest, production is differentiated by region, according to apple maggot status.
506 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
A total of three regions have been identified—Washington Infested, Washington Nonin-
fested, and the rest of the United States, where the rest of the United States is considered
to be infested by apple maggots. A separate set of Equations (1)–(8) is specified for each
region. Each region has its own set of inventories, production cost, and yields. The tran-
sition from Washington Infested to Washington Noninfested is determined by the speed
of population advance. All outputs from the three regions are homogeneous for domestic
production, so that a single domestic demand function is specified. Total exports of apples
to Canada are segmented into Washington exports and the rest of the U.S. exports to
accommodate the different trade restrictions Canada imposes according to apple maggot
status. The share of Washington exports are determined by price differentials as a result
of the imposed treatment cost for apples from an infested area.
The model is calibrated to the base year 2002. Demand elasticities (domestic and
foreign) are estimated using data from various sources. Domestic demand is specified
as a constant elasticity function, with price being the dependent variable. Annual apple
price and consumption series for fresh apple consumption from 1980 to 2003 is obtained
from the Fruit and Tree Nut Yearbook 2004 (Economic Research Services, USDA 2004).
The domestic demand elasticity is estimated to be –1.11. Demand elasticities for major
export markets, including Canada, Mexico, Taiwan, Indonesia, United Kingdom, Hong
Kong, Malaysia, and rest of the world (ROW), are estimated using annual price and
export quantity series dated from 1990 to 2004, obtained from the World Trade Atlas
(U.S. Department of Commerce 2005). The seven countries jointly accounted for about
75% of the total of U.S. fresh apple exports in 2004. Import demand elasticities of foreign
fresh apples for Chile,5New Zealand, and Canada are estimated using annual price and
import quantity data from 1990 to 2004 (also obtained from World Trade Atlas). These
countries accounted for more than 90% of total imports in 2004. The export and import
demand elasticities are listed in Table 1 later.
Annual yield per acre and annual production costs for both high- and low-density
orchards are obtained from a research report by Bechtel et al (1995) and are listed
Table 1. Demand elasticities for fresh apples
Country Elasticity
Export –14.76
Mexico –2.52
Taiwan –0.43
Indonesia –3.17
United Kingdom –0.37
Hong Kong –0.65
Malaysia –1.75
ROW –1.95
Import
Chile 1.45
New Zealand –0.31
Canada –0.56
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 507
in Tables A.1 and A.2. It is assumed that a 1% increase in total production would
increase the maintenance cost by 1%, representing supply elasticity of one in all input
factors for maintenance.6The planting cost is also assumed to increase by 1% when new
planting would be increased by 1%. Growers are assumed to form na¨
ıve expectations
on prices. Initial values of inventories are extrapolated from acreage of bearing and
nonbearing data published in 2002 agricultural census (listed in Table A.3). All other
constants are calibrated so that the quantities in the model matched production, supply,
and disappearance data in 2002.
Outcomes of the invasive species component enter the bioeconomic production
model through cost adjustments. The speed of population spread of apple maggots was
calculated by dividing the total land area infested in Washington by 24 years (assuming
linear population advance at constant speed). It is also assumed that further popula-
tion advance would occur in a linear pattern, and that apple orchards would be equally
dispersed throughout the apple maggot–free area. Thus, when an acre of apple trees be-
comes infested, the production cost increased by $45 (assuming three spray applications
are needed for economic viable production, and each application costs $15/acre). Con-
sequently, the cost of exporting to Canada is increased by 30% if the exported product is
from an apple maggot–infested area.
Simulation, Scenarios, and Results
A base scenario, where apple maggot spread retains its historical speed, is first simulated
for comparison with other policy scenarios. Under this scenario, all apple production
in Washington State will be infested in 34 years. In total, eight policy scenarios, which
used linear reductions in spread speed to represent increasing effort in mitigation of apple
maggot, are simulated.
Figure 1 shows the domestic apple price responses for three different scenarios: no
spread; spread at historical speed; and spread at one-fifth of the historical speed. In each
of the three scenarios, equilibrium price displays a cyclical pattern and convergence to a
long-term equilibrium. When apple maggot is allowed to invade an area, the long-term
equilibrium price is slightly higher than that for the no-spread scenario, reflecting the
higher average production cost. Although the speed of spread changes, price differences
remain hard to distinguish in the short term. Because of the lag between investment
decision and the realization of that decision in the apple market, the effect of a policy
on apple supply is not observed until the apple trees reach reproductive maturity. It
is essential that policymakers be aware of the delayed response in price. Lack of price
response in the short term does not necessarily mean the policy has not been effective (or
ineffective). Aggressive policy based on the irresponsive short-term price without a good
understanding of the long-term impact can induce wide fluctuations in the apple market.
Figure 2 shows the time path of various welfare changes measured in millions of
dollars when apple maggot is allowed to spread at its historical speed.7As apple maggots
spread, affecting more production areas in Washington State, apple growers in Washing-
ton suffer welfare loss. Growers in the rest of the United States are better off because
they become relatively more competitive. Furthermore, consumers are worse off owing to
higher apple prices.
Under these scenarios the apple industry as a whole would suffer an annual
loss of $4–$8 million. In contrast to the time path of apple price, some welfare
508 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
0.250
0.255
0.260
0.265
0.270
0.275
1 21416181101121141161181
t
Price ($/lb)
No Spread Historical Speed 1/5 Historical Speed
Figure 1. Domestic apple price response to apple maggot spread in Washington State
distributional effects can be observed in the short term. As apple maggot continues
to spread, production cost of the affected growers will increase accordingly, thus decreas-
ing the welfare accrued to Washington growers. However, only direct cost is observed in
the short term. The indirect welfare changes caused by apple price fluctuations share the
same delay effect exhibited in apple price trajectories. While the short-term result suggests
that only growers in apple maggot–free regions may benefit from a mitigation program,
the long-term result indicates that it is also in the consumer’s interest to support such a
program.
Total present value of welfare changes for the base scenario and alternative policy
scenarios are listed in Table 2. As the speed of population spread reduces, total welfare
loss decreases in an approximately linear fashion.8Thus, under the model assumptions,
the benefit from slowing the spread of apple maggot is increasing linearly and the break-
even annual spending on mitigation effort increases linearly. From Table 2, an additional
10% reduction in spread speed will bring additional $1.52 million in benefit. That is to
say the marginal benefit of 10% speed reduction is approximately $1.52 million. Hence,
it is economically optimal if the marginal cost of achieving the 10% speed reduction is
$1.52 million.
DISCUSSION AND CONCLUSION
In an effort to provide bio-security to agricultural production, government agencies
form policies to mitigate introduction of exotic pest species. Contingency plans are
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 509
-8
-6
-4
-2
0
2
4
1 21 41 61 81 101 121 141 161 181
t
Million $
Washington PS Other PS Consumer Surplus Total Welfare
Figure 2. Welfare changes when apple maggots spread at historical speed
Table 2. Welfare results ($ million)
Speed of spread Total welfare loss Benefit of control Break-even annual spending
Historical speed V–14.76 – –
0.9 V–13.47 1.30 0.13
0.8 V–12.00 2.76 0.28
0.7 V–10.58 4.18 0.42
0.6 V–9.11 5.66 0.56
0.5 V–7.61 7.15 0.71
0.4 V–6.10 8.67 0.86
0.3 V–4.58 10.19 1.01
0.2 V–3.05 11.71 1.16
needed in response to outbreaks, no matter how effective the prevention measures
might be. For policies to be effective and efficient there should be a more compre-
hensive understanding of the nature of the economic impact of an outbreak and the
consequences of alternative policies. It is important to know the magnitude of the im-
pact, the most economical means to minimize the impact, and how consumers and
producers are affected. The primary focus of our discussion was to design a simulation
framework for perennial fruit production that can be used to address some of these
questions.
510 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
The dynamic simulation model we developed is tailored to address potential threats
posed by pest invasions in fruit production. By including heterogeneous production
systems and environments, and by allowing importing countries to endorse different
trade policies, the model can capture the impact on trade flows, total social welfare
changes, and welfare distribution among economic agents. In addition, the model cou-
ples two dynamic processes: the life cycle of perennial fruit trees and the pest dissem-
ination process. This allows us to capture the dynamic nature of the impact, including
the equilibrium time path of prices, trade flows, producer welfare, and consumer surplus.
Intertemporal welfare distribution effects can help to determine the direction and amount
of government transfer payment to solicit private cooperation in implementing the policy.
Such information provided by the model is essential in designing effective and efficient
policies.
We applied the framework to analyze apple maggot spread in the Washington State
apple industry. The simulation results provide interesting and important outcomes. Under
assumptions of the model, if the marginal cost of the current containment policy is below
$1.52 million, then the policy can be considered economical. On the other hand, if
the marginal cost exceeds $1.52 million, then it is economical to reduce the amount
of resources invested in controlling apple maggot. It is important for policymakers to
recognize that short-term price impacts are less volatile than short-term welfare impacts
from infestation. Hence, lack of price response in the short term does not necessarily
mean the policy has not been effective (or ineffective). Moreover, while short-term results
indicate that the only beneficiary from a mitigation program are the apple growers in
apple maggot–free region, the long-term results show that it also benefit consumers.
Continuous spread of apple maggot will raise production cost and consequently raise the
equilibrium apple price. Thus, an economically optimal control policy is in the interest of
both consumers and producers.
NOTES
1It has been suggested that typically three insecticide spray applications are needed to keep maggot
flies below production viable threshold, raising the cost per acre by $30–$50 (Reissig 1988).
2For example, Berentsen et al (1992), Rich (2004), and Zhao et al (2006), in their analysis of policy
response to foot-and-mouth disease, recognize that the livestock sector needs time to adjust to
shocks owing to the reproductive cycle of live animals. Marsh et al (2000) treat the viral, insect-
vector, and plant-host stocks as renewable resources to find optimal control over time in pest
management. In these examples, the dynamics embedded in the biology of both the invader and the
hosts play an important part in determining the economic outcome.
3The equations can be solved as a mixed complementarity problem (MCP) using GAMS (solver
PATH2.0).
4For details of derivation and explanation, refer to Sharov and Liebhold (1998).
5Import demand elasticity for Chile is positive. A positive elasticity is possible in net trade model
and a small country setting when the import is a very small portion of total domestic supply
(von Massow 1989). In this case, the equation is more reflective of the exporting country’s supply
condition, hence the positive sign.
6We are not aware of any empirical study that gives an estimate of supply elasticity of input factors
for the establishment and maintenance of an apple orchard. Nor do we have the data to estimate
these elasticities. Results from simulations with different assumed values showed that model stability
was not affected.
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 511
7Annual consumer surplus is measured as the area under the demand curve. Producer welfare is
approximated using the present value of realized annual profit.
8It can be shown mathematically that when speed is small (i.e., it takes many years for the pest to
invade all pest-free zones) and if there is no adjustment cost, the welfare change is approximately
a linear function of the speed. In this simulation, adjustment cost is relatively small as compare to
the rise in production cost. Intuitively, if we only focus on the near future, the less the area affected
by the pest, the less costly it is to produce the fruit.
ACKNOWLEDGMENT
The research presented in this paper is funded by the Program of Research on the Economics of
Invasive Species Management (PREISM) at USDA’s Economic Research Service.
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http://usda.mannlib.cornell.edu/usda/ers/89022/2004/index.html (accessed June 2006).
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512 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
APPENDIX
Table A1. Annual yield (900 lb bins/acre) of low- and high-density orchards
Age Low High
100
205
3515
41525
52040
62545
73045
83545
94045
10 45 45
11 45 45
12 45 45
13 45 45
14 45 45
15 45 45
16 45 45
17 45 45
18 45 45
19 45 45
20 45 45
21 45 45
22 45 45
23 45 35
24 45 25
25 45 15
26 45 5
27 45 0
28 45 0
29 45 0
30 45 0
31 45 0
32 45 0
33 45 0
34 45 0
35 35 0
ECONOMIC EFFECTS OF MITIGATING APPLE MAGGOT SPREAD 513
Table A2. Annual cost ($/acre) of low- and high-density orchards
Age Low High
1 1,672.5 2,038.89
2 1,672.5 2,038.89
3 1,983.54 2,673.48
4 2,582.54 3,065.52
5 2,860.23 3,801.24
6 3,065.14 3,528.85
7 3,160.14 3,528.85
8 3,255.14 3,528.85
9 3,350.14 3,528.85
10 3,445.14 3,528.85
11 3,445.14 3,528.85
12 3,445.14 3,528.85
13 3,445.14 3,528.85
14 3,445.14 3,528.85
15 3,445.14 3,528.85
16 3,445.14 3,528.85
17 3,445.14 3,528.85
18 3,445.14 3,528.85
19 3,445.14 3,528.85
20 3,445.14 3,528.85
21 3,445.14 3,528.85
22 3,445.14 3,528.85
23 3,445.14 3,340.85
24 3,445.14 3,152.85
25 3,445.14 2,964.85
26 3,445.14 2,776.85
27 3,445.14 0.001
28 3,445.14 0.001
29 3,445.14 0.001
30 3,445.14 0.001
31 3,445.14 0.001
32 3,445.14 0.001
33 3,445.14 0.001
34 3,445.14 0.001
35 3,257.14 0.001
514 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS
Table A3. Initial orchard inventory (acres) in 2002
Washington Rest of United States
Age Low High Low High
1 0 5,142 8,350 0
2 0 5,142 8,350 0
3 0 5,142 8,350 0
4 0 5,142 8,350 0
5 0 7,280 8,350 0
6 0 7,280 8,316 0
7 0 7,280 8,316 0
8 0 7,280 8,316 0
9 0 7,280 8,316 0
10 0 7,280 8,316 0
11 0 7,280 8,316 0
12 0 7,280 8,316 0
13 0 7,280 8,316 0
14 0 7,280 8,316 0
15 0 7,280 8,316 0
16 0 7,280 8,316 0
17 0 7,280 8,316 0
18 3,200 0 8,316 0
19 3,200 0 8,316 0
20 3,200 0 8,316 0
21 3,200 0 8,316 0
22 3,200 0 8,316 0
23 3,200 0 8,316 0
24 3,200 0 8,316 0
25 3,200 0 8,316 0
26 3,200 0 8,316 0
27 3,200 0 8,316 0
28 3,200 0 8,316 0
29 3,200 0 8,316 0
30 3,200 0 8,316 0
31 3,200 0 8,316 0
32 3,200 0 8,316 0
33 3,200 0 8,316 0
34 3,200 0 8,316 0
35 3,200 0 8,316 0
