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

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Farmers traditionally grow a variety of crops in order to decrease the adverse impact of uncertain environmental and market conditions. That is, they use agro-biodiversity as a form of natural income insurance. In this chapter, we study how risk-averse farmers manage their portfolio of agro-biodiversity to hedge their income risk from uncertain environmental conditions, and how this management decision is being affected by the availability of financial insurance. Obviously, the two options-natural insurance through agrobiodiversity and financial insurance from the market-are substitutes for risk-averse farmers (Baumgärtner 2007). So, the price of financial insurance has an impact on the level of agro-biodiversity cultivated on the farm for riskmanagement purposes: as financial insurance becomes cheaper, it drives out agro-biodiversity as a form of natural insurance.
Original languageEnglish
Title of host publicationAgrobiodiversity conservation and economic development
EditorsAndreas Kontoleon, Unai Pascual, Melinda Smale
Number of pages25
Place of PublicationAbingdon
PublisherRoutledge Publishers
Publication date06.10.2008
ISBN (Print)9780415619769, 9780415465052
ISBN (Electronic)9780203890127
Publication statusPublished - 06.10.2008