The Economics Of Biodiversity Loss
National Bureau of Economic Research (NBER)
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Abstract: This economic paper models the loss of biodiversity as a constraint on ecosystem functions and economic output. Using a nested CES production framework, the authors show that ecosystems behave as concave production functions, meaning that initial biodiversity losses produce minor impacts but successive losses trigger steep declines in productivity and resilience. The paper includes marginal species importance indices, biodiversity fragility models, and implications for optimal land use. Empirically, they link biodiversity news shocks with sovereign CDS spreads in countries with high ecological dependencies. The authors present tools for conservation prioritization, offset valuation, and biodiversity taxation. The model is applicable for integrated ecological-economic planning in biodiversity-sensitive economies like Kenya.