Abstract: Advanced technologies that mitigate global biological threats, such as vaccines for tropical diseases, are chronically underprovided because the countries able to develop them bear little of the burden. We ask how innovation responds when climate change pushes such biological threats into those countries. In our spatial dynamic game, a reproducing threat diffuses across borders; while every country controls the threat locally, only one can innovate, generating technology that spills over internationally. Our analysis yields two main findings. First, the primary catalyst for innovation is not a threat's inherent severity, but rather its underlying biology: innovation arises only when the biology makes sustained eradication infeasible. Second, technology spillovers drive innovation exclusively through their interaction with threat diffusion, as technology deployed abroad curbs the threat flowing back across borders. Applying this framework to the climate-driven expansion of dengue-transmitting mosquitoes into the U.S., structural estimates suggest that self-interested U.S. vaccine innovation could cut cases in the Americas by 54% compared to a fixed-innovation benchmark, ultimately leaving Latin America better off than before the expansion.
Abstract: We price the transboundary externality of mobile public bads such as diseases and invasive species. We focus on the marginal cost to country B of an increase in the stock (i.e., an outbreak) in country A. These cross-jurisdiction marginal costs depend not only on economic, ecological, and spatial features of both jurisdictions but also on jurisdictions’ strategic reactions to the outbreak. Using a spatial dynamic game, we calculate the “cross-jurisdiction shadow costs” of an outbreak of mobile public bad under the Markov-perfect Nash equilibrium of control efforts. We find that under reasonable conditions, the source country has private incentives to control the outbreak itself, which can lead to a situation where the cross-jurisdiction shadow cost is, in fact, zero. We also derive conditions where a country optimally fails to control the outbreak (for example, damages in that country are small), in which case cross-jurisdiction shadow costs are positive. Finally, we note that since cooperative control of the mobile public bad delivers substantially higher welfare than non-cooperative control, we derive an externality pricing instrument that perfectly internalizes the externality and induces cooperative control among all countries.
Abstract: Nonlinear dynamics, such as fish reproduction or disease transmission, are central to many resource models, and economic insights often hinge on these nonlinearities. In such settings, linearization is inadequate, and the presence of strategic interactions makes structural estimation challenging. We develop a tractable estimation method for a general class of these dynamic games using the Generalized Method of Moments (GMM). Our approach accommodates heterogeneous agents and nonlinear, interactive equations of motion. We derive sufficient conditions under which GMM estimation is feasible and establish consistency and asymptotic normality. We apply the method to a fishery game involving Japanese anchovy harvesting by China, Japan, and the Republic of Korea and estimate their strategic harvest responses to climate-induced shifts in ocean currents.
Abstract: Payments for Ecosystem Services (PES) are widely used to promote wildlife conservation on private lands, yet standard designs often ignore a fundamental ecological reality: wildlife moves across lands. We develop a spatial dynamic game between a network of landowners and a PES provider to examine how transboundary mobility shapes conservation incentives and welfare. We show that species mobility induces strategic complementarities in management decisions, causing PES contracts to systematically miss the social optimum. The direction of this inefficiency depends on whether the species is privately viewed as a “good” (e.g., bees) or a “bad” (e.g., wolves) by landowners: mobility generates under-conservation of privately good species and, paradoxically, over-conservation of privately bad species relative to the first-best. The latter arises because dispersal costs borne by neighboring landowners are not internalized by the PES contracts. Furthermore, voluntary PES programs for privately bad species can constitute an entrapment equilibrium—landowners participate rationally once others have joined, yet find themselves collectively worse off than they were without PES because payments merely deter unilateral deviation. It provides a rational foundation for why certain PES programs face local resistance while others are accepted. We propose a community voting mechanism that resolves this coordination failure.
Aggregate Quotas under Depletion Risk (with Mauricio Collado).