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Valuation of biodiversity within a north–south trade model

Published online by Cambridge University Press:  02 April 2001

Dpto. Economía Aplicada (Matemáticas), Universidad de Valladolid, Avda. Valle Esgueva, 6, Valladolid 47011. Spain


Under a General Equilibrium model of International Trade, industrialized countries export capital intensive goods, while developing countries export natural resource intensive goods. Biodiversity is viewed as the number of species conserved while producing these goods. Higher conservation increases demand, but lowers goods supply. Consumers value biodiversity as the weighted sum of all the different species. If producers of both goods conserve more species, the South's terms of trade will rise in relation to the North's. Furthermore, we believe that a switch in consumer preferences, to a more homogeneous valuation of the species, is likely. This change would drop the South's terms of trade. Therefore, under these circumstances, this region is facing a risk. In conserving additional species, the South would be better off, both because its terms of trade increases and because the risk associated with a switch in preferences decreases.

Theory and Applications
© 1999 Cambridge University Press

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