IDEAS home Printed from https://ideas.repec.org/p/lue/wpaper/281.html
   My bibliography  Save this paper

Ramsey discounting of ecosystem services

Author

Listed:
  • Stefan Baumgaertner

    () (Leuphana University of Lueneburg, Germany)

  • Alexandra M. Klein

    (Leuphana University of Lueneburg and University of Freiburg, Germany)

  • Denise Thiel

    (Leuphana University of Lueneburg, Germany, and Lund University, Sweden)

  • Klara Winkler

    (Leuphana University of Lueneburg, Germany, and University of Life Sciences, Vienna, Austria)

Abstract

Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed - based on a two-goods extension of the Ramsey growth model - to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9+-0.3 percentage points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates - one for manufactured consumption goods and one for ecosystem services.

Suggested Citation

  • Stefan Baumgaertner & Alexandra M. Klein & Denise Thiel & Klara Winkler, 2013. "Ramsey discounting of ecosystem services," Working Paper Series in Economics 281, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:281
    as

    Download full text from publisher

    File URL: https://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifvwl/WorkingPapers/lue/pdf/wp_281_Upload.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
    2. Kögel, Tomas, 2011. "On the Relation between Discounting of Climate Change and Edgeworth-Pareto Substitutability," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-12.
    3. Gollier, Christian, 2010. "Ecological discounting," Journal of Economic Theory, Elsevier, vol. 145(2), pages 812-829, March.
    4. Felix Schläpfer & Nick Hanley, 2006. "Contingent Valuation and Collective Choice," Kyklos, Wiley Blackwell, vol. 59(1), pages 115-135, February.
    5. Roger Guesnerie, 2004. "Calcul économique et développement durable," Revue économique, Presses de Sciences-Po, vol. 55(3), pages 363-382.
    6. Plambeck, Erica L. & Hope, Chris & Anderson, John, 1997. "The model: Integrating the science and economics of global warming," Energy Economics, Elsevier, vol. 19(1), pages 77-101, March.
    7. Wang, Hua & Shi, Yuyan & Kim, Yoonhee & Kamata, Takuya, 2013. "Valuing water quality improvement in China: A case study of Lake Puzhehei in Yunnan Province," Ecological Economics, Elsevier, vol. 94(C), pages 56-65.
    8. Udo Ebert, 2003. "Environmental Goods and the Distribution of Income," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(4), pages 435-459, August.
    9. Olivier Guéant & Roger Guesnerie & Jean‐Michel Lasry, 2012. "Ecological Intuition versus Economic “Reason”," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 245-272, March.
    10. Yang, Zili, 2003. "Dual-rate discounting in dynamic economic-environmental modeling," Economic Modelling, Elsevier, vol. 20(5), pages 941-957, September.
    11. Liu, Shuang & Stern, David I., 2008. "A Meta-Analysis of Contingent Valuation Studies in Coastal and Near-Shore Marine Ecosystems," MPRA Paper 11608, University Library of Munich, Germany.
    12. Aline Chiabai & Chiara Travisi & Anil Markandya & Helen Ding & Paulo Nunes, 2011. "Economic Assessment of Forest Ecosystem Services Losses: Cost of Policy Inaction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(3), pages 405-445, November.
    13. Ready, Richard C. & Malzubris, J nis & Senkane, Silva, 2002. "The relationship between environmental values and income in a transition economy: surface water quality in Latvia," Environment and Development Economics, Cambridge University Press, vol. 7(01), pages 147-156, February.
    14. Echazu Luciana & Nocetti Diego & Smith William T., 2012. "A New Look into the Determinants of the Ecological Discount Rate: Disentangling Social Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-44, April.
    15. Neumayer, Eric, 1999. "Global warming: discounting is not the issue, but substitutability is," Energy Policy, Elsevier, vol. 27(1), pages 33-43, January.
    16. Jette Jacobsen & Nick Hanley, 2009. "Are There Income Effects on Global Willingness to Pay for Biodiversity Conservation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 137-160.
    17. Hammitt, James K. & Liu, Jin-Tan & Liu, Jin-Long, 2001. "Contingent valuation of a Taiwanese wetland," Environment and Development Economics, Cambridge University Press, vol. 6(02), pages 259-268, May.
    18. Bengt Kristrom & Pere Riera, 1996. "Is the income elasticity of environmental improvements less than one?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 7(1), pages 45-55, January.
    19. Boyd, James & Banzhaf, Spencer, 2007. "What are ecosystem services? The need for standardized environmental accounting units," Ecological Economics, Elsevier, vol. 63(2-3), pages 616-626, August.
    20. Horowitz, John K. & McConnell, K. E., 2003. "Willingness to accept, willingness to pay and the income effect," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 537-545, August.
    21. Schlapfer, Felix, 2006. "Survey protocol and income effects in the contingent valuation of public goods: A meta-analysis," Ecological Economics, Elsevier, vol. 57(3), pages 415-429, May.
    22. Thomas Broberg, 2010. "Income Treatment Effects in Contingent Valuation: The Case of the Swedish Predator Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(1), pages 1-17, May.
    23. Kovenock, Daniel & Sadka, Efraim, 1981. "Progression under the benefit approach to the theory of taxation," Economics Letters, Elsevier, vol. 8(1), pages 95-99.
    24. Weikard, Hans-Peter & Zhu, Xueqin, 2005. "Discounting and environmental quality: When should dual rates be used?," Economic Modelling, Elsevier, vol. 22(5), pages 868-878, September.
    25. Traeger, Christian P., 2011. "Sustainability, limited substitutability, and non-constant social discount rates," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 215-228, September.
    26. Pasquale Lucio Scandizzo & Marco Ventura, 2008. "Contingent valuation of natural resources: a case study for Sicily," ISAE Working Papers 91, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    27. Gerlagh, Reyer & van der Zwaan, B. C. C., 2002. "Long-Term Substitutability between Environmental and Man-Made Goods," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 329-345, September.
    28. J.K. Horowitz, 2002. "Preferences in the Future," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(3), pages 241-258, March.
    29. Yu, Xiaohua & Abler, David, 2010. "Incorporating zero and missing responses into CVM with open-ended bidding: willingness to pay for blue skies in Beijing," Environment and Development Economics, Cambridge University Press, vol. 15(05), pages 535-556, October.
    30. Colin Price, 2003. "Diminishing marginal utility: the respectable case for discounting?," International Journal of Sustainable Development, Inderscience Enterprises Ltd, vol. 6(1), pages 117-132.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Drupp, Moritz A. & Meya, Jasper N. & Baumgärtner, Stefan & Quaas, Martin F., 2017. "Economic inequality and the value of nature," Economics Working Papers 2017-08, Christian-Albrechts-University of Kiel, Department of Economics.
    2. repec:eee:forpol:v:83:y:2017:i:c:p:58-69 is not listed on IDEAS
    3. Joachim Wagner, 2014. "Low-productive exporters are high-quality exporters. Evidence from Germany," Economics Bulletin, AccessEcon, vol. 34(2), pages 745-756.

    More about this item

    Keywords

    discounting; ecosystem services; (de)growth; heterogeneous consumption; Ramsey model; substitution;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lue:wpaper:281. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Wagner). General contact details of provider: https://leuphana.de/institute/ivwl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.