Hedging Strategies in Forest Management

Brunette, Marielle and Couture, Stéphane and Langlais, Eric (2007): Hedging Strategies in Forest Management.

Abstract

The paper focuses on forests management strategies for natural hazards of nonindustrial owners, in the case where the forest provides nontimber services. We introduce a basic two-period model where the private owner manages natural hazards on his forest thanks to the accumulation of savings on his individual income, or to the adoption of sylvicultural practices. We show that: 1/ the harvesting rule, in the presence of amenity services and a random growth rate for forest, is smaller than the one predicted under the Faustmann's rule; 2/ savings and sylvicultural pratices may be seen as perfectly substitutable tools for the management of natural hazards. However, our analysis predicts that the harvesting rule displays a specific sensibility to price effects and/or changes in the distribution of natural hazards, depending on whether forest owners opt for the financial strategy or undertake sylvicultural practices.

• Item Type: MPRA Paper
• Institution: Beta-CNRS and Nancy University, LEF-ENGREF-INRA of Nancy
• Language: English
• Keywords: Risk; Forest; Amenities; Savings and Sylvicultural Practices
• Subjects: D - Microeconomics > D2 - Production and Organizations > D20 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q19 - Other; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q10 - General