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The Value of Biodiversity as an Insurance Device

Emmanuelle Augeraud-Véron (), Giorgio Fabbri () and Katheline Schubert ()

No 1709, AMSE Working Papers from Aix-Marseille School of Economics, Marseille, France

Abstract: This paper presents a benchmark endogenous growth model including biodiversity preservation dynamics. Producing food requires land, and increasing the share of total land devoted to farming mechanically reduces the share of land devoted to biodiversity conservation. However, the safeguarding of a greater number of species is associated to better ecosystem services – pollination, flood control, pest control, etc., which in turn ensure a lower volatility of agricultural productivity. The optimal conversion/preservation rule is explicitly characterized, as well as the value of biological diversity, in terms of the welfare gain of biodiversity conservation. The Epstein-Zin-Weil specification of the utility function allows us to disentangle the effects of risk aversion and aversion to fluctuations. A two-player game extension of the model highlights the effect of volatility externalities and the Paretian sub-optimality of the decentralized choice.

Keywords: collective decibiodiversity; stochastic endogenous growth; insurance value; recursive preferences (search for similar items in EconPapers)
JEL-codes: Q56 Q58 Q10 Q15 O13 O20 C73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-env, nep-gro and nep-upt
Date: 2017-03
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Working Paper: The value of biodiversity as an insurance device (2017) Downloads
Working Paper: The Value of Biodiversity as an Insurance Device (2017) Downloads
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