Ramsey discounting of ecosystem services

Stefan Baumgaertner (), Alexandra M. Klein, Denise Thiel and Klara Winkler
Additional contact information
Stefan Baumgaertner: Leuphana University of Lueneburg, Germany
Alexandra M. Klein: Leuphana University of Lueneburg and University of Freiburg, Germany
Denise Thiel: Leuphana University of Lueneburg, Germany, and Lund University, Sweden
Klara Winkler: Leuphana University of Lueneburg, Germany, and University of Life Sciences, Vienna, Austria
Authors registered in the RePEc Author Service: Stefan Baumgärtner

No 281, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed - based on a two-goods extension of the Ramsey growth model - to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9+-0.3 percentage points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates - one for manufactured consumption goods and one for ecosystem services.

Keywords: discounting; ecosystem services; (de)growth; heterogeneous consumption; Ramsey model; substitution (search for similar items in EconPapers)
JEL-codes: H43 Q28 Q51 Q57 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-08
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Ramsey Discounting of Ecosystem Services (2015)
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