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A Note on the Valuation of Ecosystem Services in Production

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  • Simpson, R. David

Abstract

There has been considerable recent interest in the valuation of ecosystem services. We focus here on the value of such services in the production of market goods. Although the conceptual basis for conducting such exercises is straightforward, the data with which to implement them empirically is generally not available. An upper bound on the value of ecosystem services arises when the production technology exhibits constant returns to scale in ecosystem services and market inputs jointly. There are compelling reasons to suppose that the existence of fixed factors of production would imply that production technologies exhibit decreasing return to scale. Under these circumstances, no general conclusions can be drawn. We show in an illustrative example that a range of outcomes is possible, depending on the substitutability between ecosystem services and other inputs and the scarcity of ecosystem services relative to other factors of production.

Suggested Citation

  • Simpson, R. David, 2001. "A Note on the Valuation of Ecosystem Services in Production," Discussion Papers dp-01-16, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-01-16
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-01-16.pdf
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    References listed on IDEAS

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    1. Simpson, R David & Sedjo, Roger A & Reid, John W, 1996. "Valuing Biodiversity for Use in Pharmaceutical Research," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 163-185, February.
    2. Diamond, Peter, 1996. "Testing the Internal Consistency of Contingent Valuation Surveys," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 337-347, May.
    3. Costanza, Robert & d'Arge, Ralph & de Groot, Rudolf & Farber, Stephen & Grasso, Monica & Hannon, Bruce & Limburg, Karin & Naeem, Shahid & O'Neill, Robert V. & Paruelo, Jose, 1998. "The value of the world's ecosystem services and natural capital," Ecological Economics, Elsevier, vol. 25(1), pages 3-15, April.
    4. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    5. Geoghegan, Jacqueline & Wainger, Lisa A. & Bockstael, Nancy E., 1997. "Spatial landscape indices in a hedonic framework: an ecological economics analysis using GIS," Ecological Economics, Elsevier, vol. 23(3), pages 251-264, December.
    6. Acharya, Gayatri, 2000. "Approaches to valuing the hidden hydrological services of wetland ecosystems," Ecological Economics, Elsevier, vol. 35(1), pages 63-74, October.
    7. Toman, Michael, 1998. "SPECIAL SECTION: FORUM ON VALUATION OF ECOSYSTEM SERVICES: Why not to calculate the value of the world's ecosystem services and natural capital," Ecological Economics, Elsevier, vol. 25(1), pages 57-60, April.
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    More about this item

    Keywords

    ecosystem services; returns to scale; elasticity of substitution;

    JEL classification:

    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other

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