Biodiversity's Contribution to Production | Frederik Noack

Professor Noack is Associate Professor of the Food and Resource Economics Group (Canada) at the University of British Columbia. Frederik Noack will be presenting the paper Biodiversity’s Contribution to Production.

Abstract

Biodiversity is declining globally, but the economic consequences of this decline are largely unknown. Two challenges have stymied understanding: First, biodiversity and economic development are endogenously determined such that estimating the effects of biodiversity declines on economic outcomes is contaminated by the impact of economic development on biodiversity. Exogeneous variation in biodiversity is needed to parse the reverse causality, yet a source of exogenous variation in biodiversity is rare. Second, the economic benefit of biodiversity for economic production beyond the value of individuals or species is conceptually vague and empirically data-demanding. This paper suggests a framework to quantify the relationship between biodiversity and ecosystem services, taking both the value of individuals and the complementarities of individuals between different species into account. It then takes the theoretical insights to the data to quantify the impact of biodiversity for agricultural and forest production. Specifically, we use variations in the returns of migratory birds from their South American wintering areas to predict bird diversity in North America independent of agricultural development, a primary driver of North American bird declines. Our results show that a 10% decline in bird diversity reduces agricultural revenues by about 1% and increases damaging forest pest outbreaks by 0 to 5%. They further show that the elasticity of substitution across similar species is high and that their contribution to production declines with the development of technical substitutes for biodiversity, such as genetically modified pest resistance in crops.

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