The economic insurance value of ecosystem resilience
AbstractEcosystem resilience, i.e. an ecosystem’s ability to maintain its basic functions and controls under disturbances, is often interpreted as insurance: by decreasing the probability of future drops in the provision of ecosystem services, resilience insures risk-averse ecosystem users against potential welfare losses. Using a general and stringent definition of “insurance” and a simple ecological-economic model, we derive the economic insurance value of ecosystem resilience and study how it depends on ecosystem properties, economic context, and the ecosystem user’s risk preferences. We show that (i) the insurance value of resilience is negative (positive) for low (high) levels of resilience, (ii) it increases with the level of resilience, and (iii) it is one additive component of the total economic value of resilience.
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Bibliographic InfoPaper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 132.
Length: 38 pages
Date of creation: Jul 2009
Date of revision:
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Web page: http://leuphana.de/institute/ivwl.html
ecosystem; economic value; insurance; resilience; risk; risk preferences;
Find related papers by JEL classification:
- Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-08-02 (Agricultural Economics)
- NEP-ALL-2009-08-02 (All new papers)
- NEP-ENV-2009-08-02 (Environmental Economics)
- NEP-IAS-2009-08-02 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles Perrings & David Stern, 2000. "Modelling Loss of Resilience in Agroecosystems: Rangelands in Botswana," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 185-210, June.
- Bruno Jullien & Georges Dionne & Bernard Caillaud, 2000. "Corporate insurance with optimal financial contracting," Economic Theory, Springer, vol. 16(1), pages 77-105.
- Karl-Göran Mäler, 2008. "Sustainable Development and Resilience in Ecosystems," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(1), pages 17-24, January.
- Martin F. Quaas & Stefan Baumgärtner, 2006.
"Natural vs. financial insurance in the management of public-good ecosystems,"
Working Paper Series in Economics
34, University of Lüneburg, Institute of Economics.
- Quaas, Martin F. & Baumgärtner, Stefan, 2008. "Natural vs. financial insurance in the management of public-good ecosystems," Ecological Economics, Elsevier, vol. 65(2), pages 397-406, April.
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