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http://hdl.handle.net/10419/28179
  
Title:Agro-biodiversity as natural insurance and the development of financial insurance markets PDF Logo
Authors:Baumgärtner, Stefan
Quaas, Martin F.
Issue Date:2007
Series/Report no.:University of Lüneburg working paper series in economics 61
Abstract: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.
JEL:Q1
Q57
H23
D62
Document Type:Working Paper
Appears in Collections:Working Paper Series in Economics, Leuphana Universität Lüneburg

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