The Private and Public Insurance Value of Conservative Biodiversity Management

43 Pages Posted: 21 Mar 2006

See all articles by Stefan Baumgärtner

Stefan Baumgärtner

University of Freiburg - Department of Environment and Natural Resources

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Date Written: October 2006

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 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 ecosystem 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

JEL Classification: Q57, H23, D81, D62

Suggested Citation

Baumgärtner, Stefan and Quaas, Martin F., The Private and Public Insurance Value of Conservative Biodiversity Management (October 2006). Available at SSRN: https://ssrn.com/abstract=892101 or http://dx.doi.org/10.2139/ssrn.892101

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

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

HOME PAGE: http://www.idiv.de/bioecon

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