Working Paper Series, Department of Economics, Uppsala University
No 2010:16:
Measuring sustainability under regime shift uncertainty: A resilience pricing approach
Chuan-Zhong Li ()
and Karl-Göran Mäler ()
Abstract: This paper is concerned with the theory of resilience
pricing and sustainability measurement in the presence of risk for regime
shift in a dynamic economy-environment system. Following Holling (1973),we
consider resilience as the maximal perturbation that the system can absorb
without flipping into a qualitatively different state. Using a multisector
growth model under uncertainty, we derive the shadow price of resilience
that affects the probabilities of the system to flip in the future. We also
analyze the role of resilience on sustainability with both ex-ante and
ex-post welfare measures.
Keywords: Regime shift; resilience; ecosystem; valuation; and inclusive wealth; (follow links to similar papers)
JEL-Codes: D60; D90; Q50; (follow links to similar papers)
20 pages, July 2, 2010
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