Biological Control of Giant Reed (Arundo donax): Economic Aspects

analysis is based on the change in gross returns and the current prices received by farmers
(Lacewell 2008).

Benefit-Cost Analysis

The irrigated composite acre (including higher-value crops and alternatively only with the
lower-value crops) is applied to the projected net quantity of water saved as a result of the
deployment of the beneficial insects. The result is an estimate of the market value of the net
water saved to the Rio Grande Valley due to the effectiveness of the biological controls. The
normalized prices applied to the crops of the composite acres are also multiplied by the number
of acre-feet of water saved from the use of the biological control agents. The annual costs of the
beneficial-insect control program and annual benefits are inflated at 2.043% and then discounted
at 6.125% discount rate to calculate present value of benefits and costs (Rister et al. 2008).
These values are used in developing the benefit-cost analysis of the project for the Rio Grande
River Basin. For social benefits in a benefit-cost analysis, the normalized prices for crops are
applied (Lacewell 2008).

Economic Impact Analysis

Economic impacts to the Texas Lower Rio Grande Valley in terms of economic activity
and employment due to the projected saved water are determined using the IMPLAN model, an
input/output model developed by Minnesota ImPLAN Group, Inc. (2004). This model generates
multipliers to estimate increased economic activity and employment resulting from an increase in
gross revenue by sector (crops in this case). The multipliers can be developed for a region such
as the Lower Rio Grande Valley, a state, or the entire United States. The ImPLAN approach to

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