A Model of Economic Growth and Biodiversity

Loris André
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Loris André: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris

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Abstract: This paper develops a macroeconomic growth model that integrates biodiversity as a productive input via its role in water regulation, a key ecosystem service. Land-use decisions drive biodiversity loss, which reduces water availability and, hence, productivity across all sectors.Using global input-output data, I estimate production functions that incorporate water and land as environmental inputs. Quantitatively, internalizing biodiversity's contribution to water supply leads to a significant reduction in land conversion, with about half of this optimal reduction attributable to the impact on industrial and service sectors, not just agriculture. Although GDP slightly declines, long-term welfare improves thanks to higher consumption and a more sustainable reliance on natural capital. The reallocation from produced to natural capital lowers investment requirements. The framework highlights biodiversity's macroeconomic value and its relevance for optimal land-use policy.

Keywords: Economic Growth; Biodiversity; Ecosystem services; Water (search for similar items in EconPapers)
Date: 2026-03
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