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Measuring sustainability under regime shift uncertainty: a resilience pricing approach

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Listed author(s):
  • MÄLER, KARL-GÖRAN
  • LI, CHUAN-ZHONG

Abstract

This paper is concerned with the theory of resilience pricing and sustainability measurement in the presence of risk for regime shift in a dynamic economy–environment system. Following Holling ( Annual Review of Ecology and Systematics , vol. 4, 1973, pp. 1–23), we consider resilience as the maximal perturbation that the system can absorb without flipping into a qualitatively different state. Using a multisector growth model under uncertainty, we derive the shadow price of resilience that affects the probabilities of the system to flip in the future. We also analyze the role of resilience on sustainability with both ex-ante and ex-post welfare measures.

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Article provided by Cambridge University Press in its journal Environment and Development Economics.

Volume (Year): 15 (2010)
Issue (Month): 06 (December)
Pages: 707-719

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Handle: RePEc:cup:endeec:v:15:y:2010:i:06:p:707-719_00
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Find related papers by JEL classification:
  • D60 - Microeconomics - - Welfare Economics - - - General
  • D90 - Microeconomics - - Intertemporal Choice - - - General
  • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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  1. Karl-Göran Mäler, 2008. "Sustainable Development and Resilience in Ecosystems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(1), pages 17-24, January.
  2. Brian Walker & Leonie Pearson & Michael Harris & Karl-Göran Maler & Chuan-Zhong Li & Reinette Biggs & Tim Baynes, 2010. "Incorporating Resilience in the Assessment of Inclusive Wealth: An Example from South East Australia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(2), pages 183-202, February.
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Cited by:

  1. Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011. "Optimal management with potential regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 229-240, September.
  2. Ben Heijdra & Pim Heijnen, 2013. "Environmental Abatement and the Macroeconomy in the Presence of Ecological Thresholds," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(1), pages 47-70, May.
  3. Tobon Orozco, David & Molina Guerra, Carlos & Vargas Cano, John Harvey, 2016. "Extent of Expected Pigouvian Taxes and Permits for Environmental Services in a General Equilibrium Model with a natural capital constraint," BORRADORES DEPARTAMENTO DE ECONOMÍA 015258, UNIVERSIDAD DE ANTIOQUIA - CIE.
  4. Li, Chuan-Zhong & Bali Swain, Ranjula, 2014. "Growth, Water Resilience, and Sustainability: A DSGE Model Applied to South Africa," Working Paper Series 2014:11, Uppsala University, Department of Economics.
  5. Chuan-Zhong Li & Sebastian Villasante & Xueqin Zhu, 2016. "Regime Shifts and Resilience in Fisheries Management: A Case Study of the Argentinean Hake fishery," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(3), pages 623-637, November.
  6. Chuan-Zhong Li & Gunnar Isacsson, 2012. "Valuing urban accessibility and air quality in Sweden," Empirical Economics, Springer, vol. 42(3), pages 881-898, June.

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