Another Look at Pesticide Productivity and Pest Damage

Using the Lichtenberg-Zilberman-Fox-Weersink damage specification, we develop a short-run, supply-response framework based on rational producer behavior in the presence of damage agents. We show how representation can be used to measure and decompose the economic damage associated with the presence of pests, how to measure the shadow prices of damage-control agents, how to measure the manner in which pesticide application biases variable input use, and how pesticide application affects the relative returns to quasi-fixed factors of production. An econometric version of the model is estimated using a panel data set on Greek olive producers. Both our theoretical and our empirical results suggest that the most traditional measure of pest damage understates actual economic losses and revenue losses due to pests.