The costs and benefits of refuge requirements: The case of Bt cotton

Abstract

Refuge requirements have been the primary regulatory tool to delay pest resistance to Bt crops. This paper presents a simple method to estimate the annual cost of refuges to producers, applying it to Bt cotton. It also examines broader welfare impacts, estimating how Bt cotton acreage restrictions affect producer surplus, consumer surplus, seed supplier profits, and commodity program outlays. The implications of grower adoption behavior -- partial adoption, aggregate adoption, and refuge choice -- for regulatory costs are examined. Empirical examples illustrate how providing multiple refuge options significantly reduces regulatory costs.