Volatility-reducing biodiversity conservation under strategic interactions

Emmanuelle Augeraud-Véron, Giorgio Fabbri and Katheline Schubert

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Abstract: How can decentralized individual decisions inefficiently reduce the ability of biodiversity to mitigate ecological and environmental variability and then its "natural insurance" role? In this article we present a simple theoretical setup to address this question and to evaluate some policy options. We study a model of strategic competition among farmers for the conversion of a natural forest to agricultural land. Unconverted forest land allows to conserve biodiversity, which contributes to reducing the volatility of agricultural production. Agents' utility is given in terms of a Kreps Porteus stochastic differential utility capable of disentangling risk aversion and aversion to fluctuations. We characterize the land used by each farmer and her welfare at the Nash equilibrium, we evaluate the overexploitation of the land and the agents' welfare loss compared to the socially optimal solution and we study the drivers of the inefficiencies of the decentralized equilibrium. After characterizing the value of biodiversity in the model, we use it to obtain a decomposition which helps to study the policy implications of the model by identifying in which cases the allocation of property rights is preferable to the introduction of a tax on land conversion. Our results suggest that enforcing property rights is more relevant in case of stagnant economies while taxing land conversion may be more suited for rapidly developing economies.

Keywords: Biodiversity; Insurance value; Land conversion; Recursive preferences; Stochastic differential games (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-agr, nep-env, nep-gth and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-03369958v1
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Citations: View citations in EconPapers (1)

Published in Ecological Economics, 2021, 190, ⟨10.1016/j.ecolecon.2021.107193⟩

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Related works:
Journal Article: Volatility-reducing biodiversity conservation under strategic interactions (2021)
Working Paper: Volatility-reducing biodiversity conservation under strategic interactions (2021)
Working Paper: Volatility-Reducing Biodiversity Conservation Under Strategic Interactions (2020)
Working Paper: Volatility-reducing biodiversity conservation under strategic interactions (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03369958

DOI: 10.1016/j.ecolecon.2021.107193

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