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Volatility-reducing biodiversity conservation under strategic interactions

Author

Listed:
  • Emmanuelle Augeraud-Véron

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

  • Giorgio Fabbri

    (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

  • Katheline Schubert

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract
How can decentralized individual decisions inefficiently reduce the ability of biodiversity to mitigate ecological and environmental variability and then its "natural insurance" role? In this article we present a simple theoretical setup to address this question and to evaluate some policy options. We study a model of strategic competition among farmers for the conversion of a natural forest to agricultural land. Unconverted forest land allows to conserve biodiversity, which contributes to reducing the volatility of agricultural production. Agents' utility is given in terms of a Kreps Porteus stochastic differential utility capable of disentangling risk aversion and aversion to fluctuations. We characterize the land used by each farmer and her welfare at the Nash equilibrium, we evaluate the overexploitation of the land and the agents' welfare loss compared to the socially optimal solution and we study the drivers of the inefficiencies of the decentralized equilibrium. After characterizing the value of biodiversity in the model, we use it to obtain a decomposition which helps to study the policy implications of the model by identifying in which cases the allocation of property rights is preferable to the introduction of a tax on land conversion. Our results suggest that enforcing property rights is more relevant in case of stagnant economies while taxing land conversion may be more suited for rapidly developing economies.

Suggested Citation

  • Emmanuelle Augeraud-Véron & Giorgio Fabbri & Katheline Schubert, 2021. "Volatility-reducing biodiversity conservation under strategic interactions," Post-Print hal-03369958, HAL.
    • Handle: RePEc:hal:journl:hal-03369958
    DOI: 10.1016/j.ecolecon.2021.107193
    Note: View the original document on HAL open archive server: https://hal.science/hal-03369958v1
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    Cited by:

    1. Augeraud-Véron, Emmanuelle & Fabbri, Giorgio & Schubert, Katheline, 2021. "Prevention and mitigation of epidemics: Biodiversity conservation and confinement policies," Journal of Mathematical Economics, Elsevier, vol. 93(C).
    2. Kelsall, Claudia & Quaas, Martin F. & Quérou, Nicolas, 2023. "Risk aversion in renewable resource harvesting," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    3. Augeraud-Véron, Emmanuelle & Fabbri, Giorgio & Schubert, Katheline, 2021. "Prevention and mitigation of epidemics: Biodiversity conservation and confinement policies," Journal of Mathematical Economics, Elsevier, vol. 93(C).

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    More about this item

    Keywords

    Biodiversity; Insurance value; Land conversion; Recursive preferences; Stochastic differential games;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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