The Economic Insurance Value of Ecosystem Resilience

38 Pages Posted: 4 Jul 2009 Last revised: 23 Apr 2014

See all articles by Stefan Baumgärtner

Stefan Baumgärtner

University of Freiburg - Department of Environment and Natural Resources

Sebastian Strunz

Leuphana University of Lueneburg

Date Written: February 27, 2014

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 (marginal) 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 (overall always positive) economic value of resilience.

Keywords: ecosystem resilience, economic value, insurance, risk, risk preferences

JEL Classification: Q57, Q56, D81, G22

Suggested Citation

Baumgärtner, Stefan and Strunz, Sebastian, The Economic Insurance Value of Ecosystem Resilience (February 27, 2014). Ecological Economics, 101, 21-31 (2014). Available at SSRN: https://ssrn.com/abstract=1429269 or http://dx.doi.org/10.2139/ssrn.1429269

Stefan Baumgärtner (Contact Author)

University of Freiburg - Department of Environment and Natural Resources ( email )

Tennebacher Str. 4
Freiburg, 79106
Germany

HOME PAGE: http://www.ere.uni-freiburg.de

Sebastian Strunz

Leuphana University of Lueneburg ( email )

Scharnhorststrasse 1
Lüneburg, 21314
Germany

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