The Private and Public Insurance Value of Conservative Biodiversity Management

No 33, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: The ecological literature suggests that biodiversity reduces the variance of ecosystem services. Thus, conservative biodiversity management has an insurance value to risk-averse users of ecosystem services. We analyze a conceptual ecological-economic model in which such management measures generate a private benefit and, via ecosystem processes at higher hierarchical levels, a positive externality on other ecosystem processes at higher hierarchical levels, a positive externality on other ecosystem users. We find that ecosystem management and environmental policy depend on the extent of uncertainty and risk-aversion as follows: (i) Individual effort to improve ecosystem quality unambiguously increases. The free-rider problem may decrease or increase, depending on the characteristics of the ecosytsem and its management; in particular, (ii) the size of the externality may decrease or increase, depending on how individual and aggregate management effort influence biodiversity; and (iii) the welfare loss due to free-riding may decrease or increase, depending on how biodiversity influences ecosystem service provision.

Keywords: biodiversity; ecosystem services; ecosystem management; free-riding; insurance; public good; risk-aversion; uncertainty (search for similar items in EconPapers)
Pages: 48 pages
Date: 2006-10-26
New Economics Papers: this item is included in nep-env, nep-ias and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: The private and public insurance value of conservative biodiversity management (2005)
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