Valuing ecosystem services: A shadow price for net primary production

Article history: Received 28 August 2006 Received in revised form 8 March 2007 Accepted 8 March 2007 Available online 3 May 2007 We analyze the contribution of ecosystem services to GDP and use this contribution to calculate an empirical price for ecosystem services. Net primary production is used as a proxy for ecosystem services and, along with capital and labor, is used to estimate a Cobb Douglas production function from an international panel. A positive output elasticity for net primary production probably measures both marketed and nonmarketed contributions of ecosystems services. The production function is used to calculate the marginal product of net primary production, which is the shadow price for ecosystem services. The shadow price generally is greatest for developed nations, which have larger technical scalars and use less net primary production per unit output. The rate of technical substitution indicates that the quantity of capital needed to replace a unit of net primary production tends to increase with economic development, and this rate of replacement may ultimately constrain economic growth. Published by Elsevier B.V.