Stefano Giglio

Yale School of Management

The Economics of Biodiversity Loss

Monday, February 24, 2025 –05:15 – 06:30 PM (CET)

This session will be held online only. To join virtually, please register in advance using this link.

Seminar Abstract
We explore the economic effects of biodiversity loss by developing an ecologically-founded model that captures how different species interact to deliver the eco­system services that complement other factors of economic production. Aggregate eco­system services are produced by combining several non-substitutable eco­system functions such as pollination and water filtration, which are each provided by many substitutable species playing similar roles. As a result, economic output is an increasing but highly concave function of species richness. The marginal economic value of a species depends on three factors: (i) the number of similar species within its eco­system function, (ii) the marginal importance of the affected function for overall eco­system productivity, and (iii) the extent to which eco­system services constrain economic output in each country. Using our framework, we derive expressions for the fragility of eco­system service provision and its evolution over time, which depends, among other things, on the distribution of biodiversity losses across eco­system functions.

We discuss how these fragility measures can help policymakers assess the risks induced by biodiversity loss and prioritize conservation efforts. We also embed our model of eco­system service production in a standard economic model to study optimal land use when land use raises output at the cost of reducing biodiversity. We find that even in settings where species loss does not reduce output substanti­ally today, it lowers growth opportunities and reduces resilience to future species loss, especially when past species loss has been asymmetric across functions. Consistent with these predictions of our model, we show empirically that news about biodiversity loss increases spreads on credit default swaps (CDS) more for countries with more depleted eco­systems.

Speaker Bio
Stefano Giglio is the Frederic D. Wolfe Professor of Finance and Management at Yale School of Management. His research interests span several topics, including asset pricing, macroeconomics, and climate finance, with a particular focus on hedging macroeconomic risks, like crash risk, uncertainty risk, and climate risk, using different financial instruments. Before joining Yale, Professor Giglio was an Associate Professor of Finance at the University of Chicago Booth School of Business, after receiving his PhD in Economics from Harvard University. He is a Faculty Research Fellow at the National Bureau of Economic Research and a Research Affiliate at the Center for Economic Policy Research, and has served as an editor for the Review of Financial Studies. He has been awarded several prizes, including the 2021 Carlo Alberto medal, awarded to an Italian economist under the age of 40 for outstanding research contributions to the field of Economics, the AQR Insight Award, and the Fama-DFA Prize, and the Moskowitz prize for sustainable finance.

Admission information
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