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Measuring sustainability under regime shift uncertainty: A resilience pricing approach

  • Li, Chuan-Zhong

    ()

    (Department of Economics)

  • Mäler, Karl-Göran

    ()

    (The Beijer Institute of Ecological Economics)

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 (1973),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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File URL: http://uu.diva-portal.org/smash/get/diva2:457405/FULLTEXT01.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2010:16.

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Length: 20 pages
Date of creation: 02 Jul 2010
Date of revision:
Handle: RePEc:hhs:uunewp:2010_016
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/Email:


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  1. Karl-Göran Mäler, 2008. "Sustainable Development and Resilience in Ecosystems," Environmental & Resource Economics, 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, European Association of Environmental and Resource Economists, vol. 45(2), pages 183-202, February.
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