Agro-biodiversity as natural insurance and the development of financial insurance markets
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Agro-biodiversity as natural insurance and the development of financial insurance markets. / Baumgärtner, Stefan; Quaas, Martin F.
Lüneburg : Institut für Volkswirtschaftslehre der Universität Lüneburg, 2007. (Working paper series in economics; No. 61).Research output: Working paper › Working papers
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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 -