Allocating inspection resources over a diverse set of imports to prevent entry of plant pests and pathogens presents a substantial policy design challenge. We model inspections of live plant imports and producer responses to inspections using a “state-dependent” monitoring and enforcement model. We capture exporter abatement response to a set of feasible inspection policies from the regulator. Conditional on this behavioral response, we solve the regulator’s problem of selecting the parameters for the state-dependent monitoring regime to minimize entry of infested shipments. We account for exporter heterogeneity, fixed penalties for noncompliance, imperfect abatement control and imperfect inspections at the border. Overall, we estimate that state-dependent targeting (based on historical interceptions) cuts the rate of infested shipments that are accepted by one-fifth, relative to uniformly allocated inspections.
- Our calibrated state-dependent inspection model finds that the optimal risk-based policy cuts the rate of infested shipments accepted into the United States by one fifth relative to uniform inspections, by reallocating existing inspection resources.
- Producers in both the high- and medium-risk inspection groups abate more under a risk-based policy than under a uniform policy.
- Producers in the medium-risk group are inspected less under risk-based inspection than under uniform inspections, but abate more in order to avoid moving to the high-risk group, which is inspected more frequently.
- Producers in the high-risk group, whose shipments are inspected more frequently, abate more under risk-based inspection than under uniform inspection to reduce costly interceptions and to move the low inspection group.
- Gains from inspections result primarily from incentivizing exporters to increase abatement, and secondarily from interceptions at the border.