TY - UNPB

T1 - Agro-biodiversity as natural insurance and the development of financial insurance markets

AU - Baumgärtner, Stefan

AU - Quaas, Martin F.

PY - 2007

Y1 - 2007

N2 - Agro-biodiversity can provide natural insurance to risk averse farmers. We employ a conceptual ecological-economic model to analyze the choice of agrobiodiversity by risk averse farmers who have access to financial insurance. We study the implications for individually and socially optimal agro-ecosystem managementand policy design when on-farm agro-biodiversity, through ecosystem processes at higher hierarchical levels, generates a positive externality on other farmers. We show that for the individual farmer natural insurance from agro-biodiversty and financial insurance are substitutes. While an improved access to financial insurance leads to lower agro-biodiversity, the e ects on the market failure problem (due to the external benefits of on-farm agro-biodiversity) and on welfare are determined by properties of the agro-ecosystem and agro-biodiversity’s external benefits. We derive a specific condition on agro-ecosystem functioning under which, if financial insurance becomes more accessible, welfare in the absence of regulation increases or decreases.

AB - Agro-biodiversity can provide natural insurance to risk averse farmers. We employ a conceptual ecological-economic model to analyze the choice of agrobiodiversity by risk averse farmers who have access to financial insurance. We study the implications for individually and socially optimal agro-ecosystem managementand policy design when on-farm agro-biodiversity, through ecosystem processes at higher hierarchical levels, generates a positive externality on other farmers. We show that for the individual farmer natural insurance from agro-biodiversty and financial insurance are substitutes. While an improved access to financial insurance leads to lower agro-biodiversity, the e ects on the market failure problem (due to the external benefits of on-farm agro-biodiversity) and on welfare are determined by properties of the agro-ecosystem and agro-biodiversity’s external benefits. We derive a specific condition on agro-ecosystem functioning under which, if financial insurance becomes more accessible, welfare in the absence of regulation increases or decreases.

KW - Economics

KW - agro-biodiversity

KW - ecosystem services

KW - agro-ecosystem managment

KW - insurance

KW - risk-aversion

KW - uncertainty

M3 - Working papers

T3 - Working paper series in economics

BT - Agro-biodiversity as natural insurance and the development of financial insurance markets

PB - Institut für Volkswirtschaftslehre der Universität Lüneburg

CY - Lüneburg

ER -