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When a High Discount Rate Encourages Biodiversity

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  • Rowthorn, Bob
  • Brown, Gardner

Abstract

Include land in a neoclassical growth model and introduce a standard biogeographic relation between species recliners (biodiversity) and land. Assume that species provide utility. The optimal constant amount of land preserved for species is obtained from steady-state conditions. Contrary to conventional wisdom, a high discount rate preserves more land when the elasticity of substitution between goods and species exceeds unity or when this elasticity is less than unity and technology is such that the output effect of a change in the interest rate exceeds the substitution effect. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Rowthorn, Bob & Brown, Gardner, 1999. "When a High Discount Rate Encourages Biodiversity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 315-332, May.
    • Handle: RePEc:ier:iecrev:v:40:y:1999:i:2:p:315-32
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    Cited by:

    1. Eppink, Florian V. & van den Bergh, Jeroen C.J.M., 2007. "Ecological theories and indicators in economic models of biodiversity loss and conservation: A critical review," Ecological Economics, Elsevier, vol. 61(2-3), pages 284-293, March.
    2. Smith, William & Son, Young Seob, 2005. "Can the desire to conserve our natural resources be self-defeating?," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 52-67, January.

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