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.
Author: | Stefan BaumgärtnerORCiDGND, Martin F. QuaasORCiD |
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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 |