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Valuing ecosystem services in general equilibrium

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  • Jared C. Carbone
  • V. Kerry Smith

Abstract

We explore the consequences of treating the multiple, non-market benefits associated with improvements in ecosystem health and the market economy from which damage to these ecosystems stems as an integrated system. We find that willingness to pay measures of use-based ecosystem services are impacted by the changes in demand for complementary market goods. Demand for these goods shifts due to the introduction of pollution regulations that deliver improvements in ecosystem services. As a result, partial equilibrium estimates of these use values may be measured with substantial error if they fail to account for the general equilibrium adjustments caused by the regulation. We also find that the basic physical/biological connections between the resources underlying use and non-use values for ecosystems may have important implications for the measurement of these values.

Suggested Citation

  • Jared C. Carbone & V. Kerry Smith, 2010. "Valuing ecosystem services in general equilibrium," NBER Working Papers 15844, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15844
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    References listed on IDEAS

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    8. J. Andrès Espinosa & V. Kerry Smith, 1995. "Measuring the Environmental Consequences of Trade Policy: A Nonmarket CGE Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 772-777.
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    Cited by:

    1. H. Allen Klaiber & V. Kerry Smith, 2013. "Developing general equilibrium benefit analyses for social programs: an introduction and example," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 6, pages 194-246 Edward Elgar Publishing.
    2. Bauer, Dana Marie & Sue Wing, Ian, 2016. "The macroeconomic cost of catastrophic pollinator declines," Ecological Economics, Elsevier, vol. 126(C), pages 1-13.

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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