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The Economic Insurance Value of Ecosystem ResilienceStefan BaumgärtnerLeuphana University of Lüneburg - Dept. of Sustainability Sciences and Dept. of Economics Sebastian StrunzLeuphana University of Lueneburg July 3, 2009 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.
Number of Pages in PDF File: 33 Keywords: ecosystem resilience, economic value, insurance, risk, risk preferences JEL Classification: Q57, Q56, D81, G22 working papers seriesDate posted: July 4, 2009Suggested CitationContact Information
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