IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Managing increasing environmental risks through agro-biodiversity and agri-environmental policies

  • Stefan Baumgärtner

    ()

    (Centre for Sustainability, Leuphana University of Lüneburg)

  • Martin F. Quaas

    ()

    (Department of Ecological Modelling, UFZ-Centre for Environmental Research Leipzig-Halle)

Agro-biodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services such as e.g. CO2 storage. We analyze the choice of agro-biodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agri-environmental policy design when on-farm agro-biodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agro-biodiversity, the level of agro-biodiversity in the laissez-faire equilibrium remains ineciently low. We show how either one of two agri-environmental policy instruments can cure this risk-related market failure: an ex-ante Pigouvian subsidy on on-farm agro-biodiversity and an ex-post compensation payment for the actual provision of public environmental benefits. In the absence of regulation, welfare may increase rather than decrease with increasing environmental risk, if the agroecosystems is characterized by a high natural insurance function, low costs and large external benefits of agro-biodiversity.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifvwl/WorkingPapers/wp_80_Upload.pdf
Download Restriction: no

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 80.

as
in new window

Length: 36 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:lue:wpaper:80
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Salvatore Di Falco & Charles Perrings, 2004. "Crop Biodiversity, Risk Management and the Implications of Agricultural Assistance," Working Papers 0084, National University of Ireland Galway, Department of Economics, revised 2004.
  2. Di Falco, Salvatore & Chavas, Jean-Paul & Smale, Melinda, 2006. "Farmer management of production risk on degraded lands: the role of wheat genetic diversity in Tigray Region, Ethiopia," EPTD discussion papers 153, International Food Policy Research Institute (IFPRI).
  3. Nick Hanley & David Oglethorpe, 1999. "Emerging Policies on Externalities from Agriculture: An Analysis for the European Union," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1222-1227.
  4. Martin F. Quaas & Stefan Baumgärtner, 2006. "Natural vs. financial insurance in the management of public-good ecosystems," Working Paper Series in Economics 34, University of Lüneburg, Institute of Economics.
  5. World Bank, 2005. "Managing Agricultural Production Risk : Innovations in Developing Countries," World Bank Other Operational Studies 14434, The World Bank.
  6. Salvatore Di Falco & Charles Perrings, 2003. "Crop Genetic Diversity, Productivity and Stability of Agroecosystems. A Theoretical and Empirical Investigation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(2), pages 207-216, 05.
  7. Heal, Geoffrey & Walker, Brian & Levin, Simon & Arrow, Kenneth & Dasgupta, Partha & Daily, Gretchen & Ehrlich, Paul & Maler, Karl-Goran & Kautsky, Nils & Lubchenco, Jane, 2004. "Genetic diversity and interdependent crop choices in agriculture," Resource and Energy Economics, Elsevier, vol. 26(2), pages 175-184, June.
  8. Yann Bramoullé & Nicolas Treich, 2009. "Can Uncertainty Alleviate the Commons Problem?," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1042-1067, 09.
  9. J. K. Horowitz & E. Lichtenberg, 1994. "Risk-Reducing And Risk-Increasing Effects Of Pesticides," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(1), pages 82-89.
  10. Heal, Geoffrey M. & Small, Arthur A., 2002. "Agriculture and ecosystem services," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 25, pages 1341-1341 Elsevier.
  11. Melinda Smale & Jason Hartell & Paul W. Heisey & Ben Senauer, 1998. "The Contribution of Genetic Resources and Diversity to Wheat Production in the Punjab of Pakistan," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 482-493.
  12. Sandler, Todd & Sternbenz, Frederic P., 1990. "Harvest uncertainty and the tragedy of the commons," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 155-167, March.
  13. Olivier Mahul, 2001. "Optimal Insurance Against Climatic Experience," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 593-604.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lue:wpaper:80. 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)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.