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The value of biodiversity as an insurance device

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

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

Abstract: This paper presents a benchmark stochastic endogenous growth model of an agricultural economy. 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, safeguarding a greater number of species guarantees, through spatial exchanges, better ecosystem services which, in turn, ensure lower volatility of agricultural productivity. The optimal conversion/conservation rule is explicitly characterized, as well as the total value of biodiversity in terms of the welfare gain from biodiversity conservation, and the marginal value of biodiversity in terms of risk premium reduction, namely its insurance value. The Epstein-Zin-Weil specification of preferences allows us to disentangle the effects of risk aversion and aversion to fluctuations.

Keywords: BIODIVERSITY; 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-ias and nep-upt
Date: 2018
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Related works:
Working Paper: The value of biodiversity as an insurance device (2018) Downloads
Working Paper: The Value of Biodiversity as an Insurance Device (2017) Downloads
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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