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When a High Discount Rate Encourages Biodiversity
Author(s) -
Rowthorn Bob,
Brown Gardner
Publication year - 1999
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00017
Subject(s) - elasticity of substitution , economics , biodiversity , elasticity (physics) , microeconomics , natural resource economics , land area , substitution (logic) , econometrics , ecology , environmental science , thermodynamics , biology , production (economics) , physics , computer science , agricultural science , programming language
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.