Analysis Agriculture production versus biodiversity protection: The impact of North–South unconditional transfers Stéphanie Aulong a , Charles Figuières b, ⁎, Sophie Thoyer c a Service Eau-Economie, BRGM-1039, rue de Pinville-34000 Montpellier, France b INRA, UMR LAMETA, 2 place Viala. 34060 Montpelier cedex 02, Montpellier, France c SupAgro, UMR LAMETA, 2 place Viala. 34060 Montpelier cedex 02, Montpellier, France abstract article info Article history: Received 7 December 2007 Received in revised form 8 February 2011 Accepted 15 March 2011 Available online 22 April 2011 JEL classification: Q10 Q57 Q58 H23 H41 Keywords: Biodiversity Agriculture Conservation policy North–South income transfers Voluntary contribution Public good Neutrality theorem Kuznets' environmental curve The purpose of this paper is to explore whether international income transfers can improve or worsen the global level of biodiversity and global social welfare by changing the relative contributions to biodiversity protection and to agricultural production. Because of the public good nature of biodiversity, Warr's neutrality theorem suggests that such transfers may have no effects at all (Warr, 1983). A model is developed, based on the simplifying assumption that northern countries have little biodiversity whereas southern countries are endowed with natural capital in the form of (generally unspoilt) biodiversity-rich land. Southern countries allocate optimally land and capital to two competing productive activities, agriculture and eco-tourism. When transfers are organized from the North to the South, we show that Warr's neutrality theorem collapses. Transfers can either reduce or increase the natural capital in the South, depending on some empirically verifiable hypotheses concerning the characteristics of the eco-tourism and agricultural production functions. In addition, we demonstrate that welfare improvements can be obtained even with reductions in the level of biodiversity. © 2011 Elsevier B.V. All rights reserved. 1. Introduction The hot spots of biodiversity, where the concentration of endemic species is high and where habitats are under serious threat, are mostly found in tropical and equatorial areas. They are thus predominantly located in developing countries, with insufficient income and/or willingness to invest in environmental protection programs. These countries often benefit from international aid dedicated to poverty alleviation and development assistance. However, such financial trans- fers may have a downside effect: by inducing substantial changes in the production and consumption patterns, they can result in greater exploitation of natural resources and ecosystems. Since development assistance and aid transfers have amounted to US$ 120 billion in 2009 (OECD DAC statistics 2006, see http://www.oecd.org/document/9/ 0,3746,en_2825_495602_1893129_1_1_1_1,00.html), 1 their unfore- seen consequences on biodiversity are an important question to address. If there exist theoretical reasons to fear that such transfers could accelerate biodiversity losses, then further conceptual and empirical research efforts would be welcome to coordinate better aid and biodiversity protection strategies. Some may argue against such a concern, on the basis that biodiversity is a global public good, 2 to the protection of which countries contribute through their domestic conservation policies and their participation to international funds and treaties dedicated to Ecological Economics 70 (2011) 1499–1507 ⁎ Corresponding author. Tel.: +33 4 99 61 22 09, fax: +33 4 67 54 58 05. E-mail address: Charles.Figuieres@supagro.inra.fr (C. Figuières). 1 This figure includes aid flows as well as contributions to international organiza- tions, technical cooperation grants, and gross debt relief. Admittedly, this is an over- estimation of the empirical relevance of the question, for a substantial part of those income flows is plagued by corruption. 2 Biodiversity conservation produces benefits which have a global public good dimension: they are non rival and non excludable at the international level. For instance, the hot spot of the Amazonian forest contributes to mitigation of the effect of global warming. The conservation of traditional crop varieties constitutes a useful gene pool in case of catastrophic crop failure associated with a new pathogen. 0921-8009/$ – see front matter © 2011 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2011.03.011 Contents lists available at ScienceDirect Ecological Economics journal homepage: www.elsevier.com/locate/ecolecon