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The value of biodiversity as an insurance device

Author

Listed:
  • Emmanuelle Augeraud-Veron

    () (Mathématiques, Image et Applications (MIA), Université de La Rochelle, France)

  • Giorgio Fabbri

    () (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE, France)

  • Katheline Schubert

    () (Paris School of Economics, Université Paris 1 Panthéon-Sorbonne, France)

Abstract

This paper presents a benchmark endogenous growth model including biodiversity preservation dynamics. Producing food requires land, and increasing the share of total land devoted to farming mechanically reduces the share of land devoted to biodiversity conservation. However, safeguarding a greater number of species guarantee better ecosystem services – pollination, flood control, pest control, etc., which in turn ensure lower volatility of agricultural productivity. The optimal conversion/preservation rule is explicitly characterized, as well as the value of biological diversity, in terms of the welfare gain from biodiversity conservation. The Epstein-Zin-Weil specification of the utility function allows us to disentangle the effects of risk aversion and aversion to fluctuations. A twoplayer game extension of the model highlights the effect of volatility externalities and the Paretian sub-optimality of the decentralized choice.

Suggested Citation

  • Emmanuelle Augeraud-Veron & Giorgio Fabbri & Katheline Schubert, 2017. "The value of biodiversity as an insurance device," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2017005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2017005
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Biodiversity; stochastic endogenous growth; insurance value; recursive preferences;

    JEL classification:

    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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