Publication Details

Category Text Publication
Reference Category Journals
DOI 10.1016/j.ecolecon.2007.07.004
Document author version
Title (Primary) Natural vs. financial insurance in the management of public-good ecosystems
Author Quaas, M.; Baumgärtner, S.
Journal Ecological Economics
Year 2008
Department OESA
Volume 65
Issue 2
Page From 397
Page To 406
Language englisch
Keywords Ecosystem services; Ecosystem management; Endogenous environmental risk; Insurance; Multi-scale ecosystem functioning; Risk aversion; Uncertainty
Abstract In the face of uncertainty, ecosystems can provide natural insurance to risk averse users of ecosystem services. We employ a conceptual ecological-economic model in which ecosystem management has a private insurance value and, through ecosystem processes at higher hierarchical levels, generates a positive externality on other ecosystem users. We analyze the allocation of (endogenous) risk and ecosystem quality by risk averse ecosystem managers who have access to financial insurance, and study the implications for individually and socially optimal ecosystem management, and policy design. We show that while an improved access to financial insurance leads to lower ecosystem quality, the effect on the extent of the public-good problem and on welfare is determined by ecosystem properties. We derive conditions on ecosystem functioning under which, if financial insurance becomes more accessible, (i) the extent of optimal regulation increases or decreases; and (ii) welfare, in the absence of environmental regulation, increases or decreases.
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Quaas, M., Baumgärtner, S. (2008):
Natural vs. financial insurance in the management of public-good ecosystems
Ecol. Econ. 65 (2), 397 - 406