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This paper presents a benchmark endogenous growth model including biodiversity
preservation dynamics. Producing food requires land, and increasing the share of total
land devoted to farming mechanically reduces the share of land devoted to biodiversity
conservation. However, the safeguarding of a greater number of species is associated to
better ecosystem services ( pollination, flood control, pest control, etc.,) which in turn ensure
a lower volatility of agricultural productivity. The optimal conversion/preservation
rule is explicitly characterized, as well as the value (in terms of the welfare cost of biodiversity
losses) of biological diversity. The Epstein-Zin-Weil specification of the utility
function allows us to disentangle the effects of risk aversion and aversion to fluctuations.
A two-player game extension of the model highlights the effect of volatility externalities
and the Paretian sub-optimality of the decentralized choice.
