Ramsey Discounting of Ecosystem Services
Research output: Journal contributions › Journal articles › Research › peer-review
Standard
In: Environmental and Resource Economics, Vol. 61, No. 2, 27.06.2015, p. 273-296.
Research output: Journal contributions › Journal articles › Research › peer-review
Harvard
APA
Vancouver
Bibtex
}
RIS
TY - JOUR
T1 - Ramsey Discounting of Ecosystem Services
AU - Baumgärtner, Stefan
AU - Klein, Alexandra-Maria
AU - Thiel, Denise
AU - Winkler, Klara
PY - 2015/6/27
Y1 - 2015/6/27
N2 - Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed—based on a two-goods extension of the Ramsey growth model—to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9 ±± 0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates—one for manufactured consumption goods and one for ecosystem services.
AB - Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed—based on a two-goods extension of the Ramsey growth model—to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9 ±± 0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates—one for manufactured consumption goods and one for ecosystem services.
KW - Ecosystems Research
KW - Discounting
KW - Ecosystem services
KW - (De)growth
KW - Heterogeneous consumption
KW - Relative scarcities
KW - Ramsey model
KW - Substitution
KW - Sustainability sciences, Management & Economics
KW - Discounting
KW - Ecosystem services
KW - (De)growth
KW - Heterogeneous consumption
KW - Relative scarcities
KW - Ramsey model
KW - Substitution
UR - http://www.scopus.com/inward/record.url?scp=84929957309&partnerID=8YFLogxK
U2 - 10.1007/s10640-014-9792-x
DO - 10.1007/s10640-014-9792-x
M3 - Journal articles
VL - 61
SP - 273
EP - 296
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
SN - 0924-6460
IS - 2
ER -