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The Value of Biodiversity as an Insurance Device

Listed author(s):
  • Emmanuelle Augeraud-Véron

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

  • Giorgio Fabbri

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille)

  • Katheline Schubert

    (PSE - Paris School of Economics)

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, the safeguarding of a greater number of species is associated to better ecosystem services – pollination, flood control, pest control, etc., which in turn ensure a 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 of 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 two-player game extension of the model highlights the effect of volatility externalities and the Paretian sub-optimality of the decentralized choice.

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Paper provided by HAL in its series Working Papers with number halshs-01493965.

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Date of creation: Mar 2017
Handle: RePEc:hal:wpaper:halshs-01493965
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01493965
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  1. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-286, April.
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