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

  • 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 management and 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.

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Metadaten
Author:Stefan Baumgärtner, Martin F. Quaas
URL: https://pub-data.leuphana.de/frontdoor/index/index/docId/522
Document Type:ResearchPaper
Language:English
Year of Completion:2007
Date of Publication (online):2007/09/12
Release Date:2007/09/12
Tag:agro-biodiversity; agro-ecosystem management; ecosystem services; insurance; risk-aversion
GND Keyword:Biodiversität; Ökosystem; Agrarökosystem; Agrarplanung; Versicherung
Institutes:Universität / Frühere Fachbereiche
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft