Agro-biodiversity as natural insurance and the development of financial insurance markets
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Chronological data
Date of first publication2007-09-12
Date of publication in PubData 2024-08-23
Language of the resource
English
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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.
Keywords
Biodiversity; Agriculture; Ecosystem; Management; Risk Aversion; Biodiversität; Ökosystem; Agrarökosystem; Agrarplanung; Versicherung; Insurance
Series title
Number of the series contribution
61