The economic insurance value of ecosystem resilience

Stefan Baumgärtner and Sebastian Strunz
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Sebastian Strunz: Sustainability Economics Group, Department of Sustainability Sciences, Leuphana University of Lüneburg, Germany

No 132, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: Ecosystem resilience, i.e. an ecosystem’s ability to maintain its basic functions and controls under disturbances, is often interpreted as insurance: by decreasing the probability of future drops in the provision of ecosystem services, resilience insures risk-averse ecosystem users against potential welfare losses. Using a general and stringent definition of “insurance” and a simple ecological-economic model, we derive the economic insurance value of ecosystem resilience and study how it depends on ecosystem properties, economic context, and the ecosystem user’s risk preferences. We show that (i) the insurance value of resilience is negative (positive) for low (high) levels of resilience, (ii) it increases with the level of resilience, and (iii) it is one additive component of the total economic value of resilience.

Keywords: ecosystem; economic value; insurance; resilience; risk; risk preferences (search for similar items in EconPapers)
JEL-codes: D81 G22 Q56 Q57 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-07
New Economics Papers: this item is included in nep-agr, nep-env and nep-ias
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Citations: View citations in EconPapers (1)

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