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An ecological economic assessment of risk-reducing effects of species diversity in managed grasslands

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  • Finger, Robert
  • Buchmann, Nina

Abstract

Over the last decade, it has been shown in the ecology literature that species diversity increases yield stability in managed grasslands. Here, we develop and apply ecological economic and econometric frameworks to evaluate these potential risk-reducing effects of species diversity in terms of yields and their temporal stability from a farmer's perspective. Our empirical analysis is based on a rich panel dataset obtained from a diversity experiment covering in total 60 species and a period of 6years. We find empirical evidence for the risk-reducing effect of species diversity and the economic assessment reveals significant insurance values associated with diversity for a risk-averse decision maker. Thus, the economic value of diversity would be underestimated if not accounting for this property, and species diversity may serve as valuable ex-ante risk management strategy.

Suggested Citation

  • Finger, Robert & Buchmann, Nina, 2015. "An ecological economic assessment of risk-reducing effects of species diversity in managed grasslands," Ecological Economics, Elsevier, vol. 110(C), pages 89-97.
  • Handle: RePEc:eee:ecolec:v:110:y:2015:i:c:p:89-97
    DOI: 10.1016/j.ecolecon.2014.12.019
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    References listed on IDEAS

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    1. Felix Schläpfer & Michael Tucker & Irmi Seidl, 2002. "Returns from Hay Cultivation in Fertilized Low Diversity and Non-Fertilized High Diversity Grassland," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 89-100, January.
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    3. Lauriane MOUYSSET (CERSP, UMR 7204, CNRS-MNHN-UPMC, SADAPT, INRA, UMR 1048) & Luc DOYEN (CERSP, UMR 7204, CNRS-MNHN-UPMC, GREThA, CNRS, UMR 5113) & Fréderic JIGUET (CERSP, UMR 7204, CNRS-MNHN-UPMC), 2012. "How does the economic risk aversion affect biodiversity?," Cahiers du GREThA 2012-03, Groupe de Recherche en Economie Théorique et Appliquée.
    4. Salvatore Di Falco & Jean-Paul Chavas, 2006. "Crop genetic diversity, farm productivity and the management of environmental risk in rainfed agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 289-314, September.
    5. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
    6. Maart-Noelck, Syster C. & Musshoff, Oliver, 2014. "Measuring the risk attitude of decision-makers: are there differences between groups of methods and persons?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), July.
    7. Salvatore Di Falco, 2012. "On the Value of Agricultural Biodiversity," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 207-223, August.
    8. Derissen, Sandra & Quaas, Martin F. & Baumgärtner, Stefan, 2011. "The relationship between resilience and sustainability of ecological-economic systems," Ecological Economics, Elsevier, vol. 70(6), pages 1121-1128, April.
    9. Salvatore Di Falco & Jean-Paul Chavas, 2008. "Rainfall Shocks, Resilience, and the Effects of Crop Biodiversity on Agroecosystem Productivity," Land Economics, University of Wisconsin Press, vol. 84(1), pages 83-96.
    10. Tilman, David & Polasky, Stephen & Lehman, Clarence, 2005. "Diversity, productivity and temporal stability in the economies of humans and nature," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 405-426, May.
    11. Stefan Baumgärtner & Martin F. Quaas, 2010. "Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 483-496, September.
    12. Chavas, Jean-Paul, 2004. "Risk Analysis in Theory and Practice," Elsevier Monographs, Elsevier, edition 1, number 9780121706210, July.
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    Cited by:

    1. repec:eee:ecolec:v:146:y:2018:i:c:p:588-596 is not listed on IDEAS
    2. François Bareille & Pierre Dupraz, 2017. "Biodiversity Productive Capacity in Mixed Farms of North-West of France: a Multi-output Primal System," Working Papers SMART - LERECO 17-03, INRA UMR SMART-LERECO.
    3. I.V. Mitrofanova & G.I. Starokozheva & E.A. Shkarupa & V.V. Batmanova & I.A. Mitrofanova & A.B. Tlisov, 2016. "Specially Protected Natural Areas Of Regions Of The Southern Federal District Of Russia: Specificity Of Approaches To Management And Conservation," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 25(3), pages 57-68.
    4. Daniels, Silvie & Witters, Nele & Beliën, Tim & Vrancken, Kristof & Vangronsveld, Jaco & Van Passel, Steven, 2017. "Monetary Valuation of Natural Predators for Biological Pest Control in Pear Production," Ecological Economics, Elsevier, vol. 134(C), pages 160-173.
    5. repec:eee:ecoser:v:24:y:2017:i:c:p:50-57 is not listed on IDEAS

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