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Returns from Hay Cultivation in Fertilized Low Diversity and Non-Fertilized High Diversity Grassland

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  • Felix Schläpfer
  • Michael Tucker
  • Irmi Seidl

Abstract

Recent ecological experiments suggest that theinterannual stability of ecosystem productivitymay be determined by the diversity of organismspresent in the system. We investigate whethersuch effects of biotic diversity on ecosystemstability may translate into economic valuesand possibly into an economic argument for themaintenance of biodiversity in managedhabitats. Applying a stochastic model fromfinancial economics to long-term harvest datafrom a grassland ecosystem we examine thepotential “insurance” value of plant diversityon the stability of yields and economic returnsin a drought-sensitive agricultural setting.Putative insurance premiums priced as putoptions on revenues from hay yield were higherfor fertilized low-diversity grassland than forunfertilized species-rich glassland. From thisperspective the annual “insurance value”(differential insurance premiums required tolock in specific rates of returns) of diverseplant communities may amount to $3.50 to$6.00 per acre. The results suggest thatincreased costs of risk in species-poorfertilized grassland may affect the optimumlevel of fertilization making lower fertilizerinput and concomitantly higher plant communitydiversity more desirable. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Felix Schläpfer & Michael Tucker & Irmi Seidl, 2002. "Returns from Hay Cultivation in Fertilized Low Diversity and Non-Fertilized High Diversity Grassland," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 89-100, January.
    • Handle: RePEc:kap:enreec:v:21:y:2002:i:1:p:89-100
    DOI: 10.1023/A:1014580317028
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    2. El Benni, Nadja & Finger, Robert & Mann, Stefan, 2012. "The effect of agricultural policy change on income risk in Swiss agriculture," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122532, European Association of Agricultural Economists.
    3. Pascual, Unai & Narloch, Ulf & Nordhagen, Stella & Drucker, Adam G., 2011. "The economics of agrobiodiversity conservation for food security under climate change," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 11(01), pages 1-30, November.
    4. Finger, Robert & Buchmann, Nina, 2015. "An ecological economic assessment of risk-reducing effects of species diversity in managed grasslands," Ecological Economics, Elsevier, vol. 110(C), pages 89-97.
    5. Cong, Rong-Gang & Hedlund, Katarina & Andersson, Hans & Brady, Mark, 2014. "Managing soil natural capital: An effective strategy for mitigating future agricultural risks," MPRA Paper 112155, University Library of Munich, Germany.
    6. El Benni, Nadja & Finger, Robert, 2014. "Where is the risk? Price, yield and cost risk in Swiss crop production," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 95(03), pages 299-326, September.
    7. Schaub, Sergei & Buchmann, Nina & Lüscher, Andreas & Finger, Robert, 2020. "Economic benefits from plant species diversity in intensively managed grasslands," Ecological Economics, Elsevier, vol. 168(C).
    8. Nastis, Stefanos A. & Michailidis, Anastasios & Mattas, Konstadinos, 2011. "Crop biodiversity repercussions of subsidized organic farming in Greece," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114628, European Association of Agricultural Economists.
    9. Baumgartner, Stefan & Becker, Christian & Faber, Malte & Manstetten, Reiner, 2006. "Relative and absolute scarcity of nature. Assessing the roles of economics and ecology for biodiversity conservation," Ecological Economics, Elsevier, vol. 59(4), pages 487-498, October.
    10. M. E. Gilbert & N. M. Holbrook, 2011. "Limitations to crop diversification for enhancing the resilience of rain-fed subsistence agriculture to drought," CID Working Papers 228, Center for International Development at Harvard University.
    11. Mouysset, L., 2014. "Agricultural public policy: Green or sustainable?," Ecological Economics, Elsevier, vol. 102(C), pages 15-23.
    12. Stefan Baumgärtner & Martin F. Quaas, 2010. "Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 483-496, September.
    13. Finger, Robert & Buchmann, Nina, 2014. "An ecological economic assessment of risk reducing effects of species diversity in grassland production," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182681, European Association of Agricultural Economists.
    14. Stefan Baumgärtner & Martin F. Quaas, 2007. "Agro-biodiversity as natural insurance and the development of financial insurance markets," Working Paper Series in Economics 61, University of Lüneburg, Institute of Economics.
    15. Sergei Schaub & Nadja El Benni, 2024. "How do price (risk) changes influence farmers’ preferences to reduce fertilizer application?," Agricultural Economics, International Association of Agricultural Economists, vol. 55(2), pages 365-383, March.
    16. Admiraal, Jeroen F. & Wossink, Ada & de Groot, Wouter T. & de Snoo, Geert R., 2013. "More than total economic value: How to combine economic valuation of biodiversity with ecological resilience," Ecological Economics, Elsevier, vol. 89(C), pages 115-122.
    17. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    18. Luigi Biagini & Simone Severini, 2021. "The role of Common Agricultural Policy (CAP) in enhancing and stabilising farm income: an analysis of income transfer efficiency and the Income Stabilisation Tool," Papers 2104.14188, arXiv.org.

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