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The value of biodiversity as an insurance device

Author

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  • Augeraud-Véron, E.
  • Fabbri, G.
  • Schubert, K.

Abstract

This paper presents a benchmark stochastic endogenous growth model of an agricultural economy. 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 guarantees, through spatial exchanges, better ecosystem services which, in turn, ensure lower volatility of agricultural productivity. The optimal conversion/conservation rule is explicitly characterized, as well as the total value of biodiversity in terms of the welfare gain from biodiversity conservation, and the marginal value of biodiversity in terms of risk premium reduction, namely its insurance value. The Epstein-Zin-Weil specification of preferences allows us to disentangle the effects of risk aversion and aversion to fluctuations.

Suggested Citation

  • Augeraud-Véron, E. & Fabbri, G. & Schubert, K., 2018. "The value of biodiversity as an insurance device," Working Papers 2018-05, Grenoble Applied Economics Laboratory (GAEL).
  • Handle: RePEc:gbl:wpaper:2018-05
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    References listed on IDEAS

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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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