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R&D and private investment: How to conserve indigenous fruit biodiversity of Southern Africa

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  • Waibel, Hermann
  • Wesseler, Justus
  • Mithöfer, Dagmar

Abstract

Indigenous fruits contribute widely to rural incomes in Southern Africa but their availability is declining. A domestication program aims to increase farm-household income and conserve biodiversity through farmer-led tree planting. Planting domesticated indigenous fruit trees is an uncertain, irreversible but flexible investment. Our analysis applies the real option approach using contingent claims analysis, which allows solving the discounting problem. The article analyses (1) to what level fruit collection cost and/or (2) the necessary technical change, i.e. breeding progress, have to rise in order to render tree planting economical, using data from income portfolios of rural households in Zimbabwe. Results currently show that collecting indigenous fruits is more profitable than planting the trees. A combination of technical change and decrease in resource abundance can provide incentives for farmer-led planting of domesticated trees and biodiversity conservation. However, breeding progress must be significant for investment in tree planting to be economically attractive. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Kiel 2005 with number 35.

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Date of creation: 2005
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Handle: RePEc:zbw:gdec05:3508

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Keywords: indigenous fruits; real option; technology adoption; uncertainty; ex ante impact assessment; Zimbabwe;

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  1. Demont, Matty & Wesseler, Justus & Tollens, Eric, 2002. "Biodiversity Versus Transgenic Sugar Beet: The One Euro Question," Working Papers 31859, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
  2. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December.
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