Brunette, Marielle and Couture, Stéphane and Langlais, Eric (2009): Amenities and Risk in Forest Management.
Download (746kB) | Preview
The objective of the paper is to analyze the risk management behavior of a non-industrial private forest owner under uncertainty about timber production. Two types of hedging strategies with harvesting decisions are studied: a financial practice versus a physical one. We develop a two-period model of hedging and harvesting decisions when the forest owner values the amenity services of forest. We study the properties of optimal current and future harvesting and hedging decisions. We show that, except when both hedging instruments are perfect substitutes, the forest owner chooses a single tool, her/his choice depending on the rate of return of the hedging instrument. We also prove that the greater the marginal utility of amenity services, the smaller the harvesting amount. We provide a comparative statics analysis on current and future harvesting and on the hedging strategies. We are interested in the impact of an increase in initial stocks (wealth and timber), timber prices (periods 1 and 2), opportunity costs of the hedging instruments (rate of return for savings and cost of the regeneration process for physical practice) and expected risk. We show, for example, that an increase in expected risk has a negative impact on period 1 harvesting and the use of hedging tools for both strategies, while the impact on period 2 harvesting is positive for savings and null for physical practice.
|Item Type:||MPRA Paper|
|Original Title:||Amenities and Risk in Forest Management|
|Keywords:||forest management, forest growth and natural risk, self-protection in forestry, savings and risk|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q26 - Recreational Aspects of Natural Resources
N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N50 - General, International, or Comparative
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics
D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving
N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q10 - General
|Depositing User:||Eric Langlais|
|Date Deposited:||21 Apr 2009 00:11|
|Last Modified:||05 Oct 2016 12:33|
T. Birch, Private forest-land owners of the northern United States, USDA Forest Services, Bulletin NE-136, 1994.
B. Butler, E. Leatherberry, National woodland owner survey: 2004 preliminary results, USDA Forest Service. http://www.fs.fed.us/woodlandowners/, 2005.
M. Schelhaas, G. Nabuurs, A. Schuck, Natural disturbances in the european forests in the 19th and 20th centuries, Global Change Biology 9 (2003) 1620–1633.
M. Brunette, S. Couture, Public compensation for windstorm damage reduces incentives for risk management investments, Forest Policy and Economics 10 (2008) 491–499.
C. of the European Communities (CEC), Communication from the Commission to the Council and the European Parliament on an EU Forest Action Plan., Available at: http : ==ec:europa:eu=agriculture=fore=action_plan=com_en:pdf:, 2006.
Food, A. O. (FAO), State of the World’s Forest, FAO, Rome, 146p., 2007.
L. Alvarez, E. Koskela, On forest rotation under interest rate variability, International Tax and Public Finance 10 (2003) 489–503.
L. Alvarez, E. Koskela, Wicksellian theory of forest rotation under interest rate variability, Journal of Economic Dynamics and Control 29 (2005) 529–545.
L. Alvarez, E. Koskela, Does risk aversion accelerate optimal forest rotation under uncertainty?, Journal of Forest Economics 12 (2006) 171–184.
P. Lohmander, Optimal harvest policy under the influence of imperfections and uncertainty, swedish University of Agriculture Science, Working Paper 22. Umeå, Sweden. 72p. (1983).
E. Koskela, Forest taxation and timber supply under price uncertainty: Perfect capital markets, Forest Science 35 (1) (1989) 137–159.
J. Kuuluvainen, Nonindustrial private timber supply and credit rationing: Microeconomic foundations with empirical evidence from the Finnish case, Swedish University of Agriculture Sciences, Report 85. Umeå, Sweden., 1989.
V. Ovaskainen, Forest taxation, timber supply and economic efficiency, Acta Forestalia Fennica 233, 88p., 1992.
C. Binkley, Economic analysis of the allowable cut effect, Forest Science 24 (6) (1980) 633–642.
P. Johansson, K. Löfgren, Six different results on the properties of the timber supply function, Swedish University of Agricultural Sciences, Report 39. Umeå, Sweden. 14 p., 1982.
J. Kuuluvainen, Virtual price approach to short-term timber supply under credit rationning, Journal of Environmental Economics and Management 19 (1990) 109–126.
J. Kuuluvainen, J. Salo, Timber supply and life cycle harvest of non-industrial private forest owners, an empirical analysis of the finnish case, Forest Science 37 (1991) 1011–1029.
E. Koskela, M. Ollikainen, Optimal design of forest taxation with multiple-use characteristics of forest stands, Environmental and Resource Economics 10 (1997) 41–62.
E. Koskela, M. Ollikainen, Timber supply, amenity values and biological risk, Journal of Forest Economics 5 (2) (1999) 285–304.
W. Reed, Protecting a forest against fire: Optimal protection patterns and harvest policies, Natural Resource Modeling 21 (1) (1987) 23–53.
G. Amacher, A. Malik, R. Haight, Not getting burned: the importance of fire prevention in forest management, Land Economics 81 (2) (2005) 284–302.
W. Max, D. Lehman, A behavioral model of timber supply, Journal of Environmental Economics and Management 15 (1988) 71–86.
V. Ovaskainen, H. Hänninen, J. Mikkola, E. Lehtonen, Cost-sharing and private timber stand improvements: a two-step estimation approach, Forest Science 52 (1) (2006) 44–54.