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Impacts of declining discount rates on optimal harvest age and land expectation values

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  • Brazee, Richard J.

Abstract

Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.

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  • Brazee, Richard J., 2018. "Impacts of declining discount rates on optimal harvest age and land expectation values," Journal of Forest Economics, Elsevier, vol. 31(C), pages 27-38.
    • Handle: RePEc:eee:foreco:v:31:y:2018:i:c:p:27-38
    DOI: 10.1016/j.jfe.2017.06.002
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    Cited by:

    1. Jussi Lintunen & Aapo Rautiainen & Jussi Uusivuori, 2022. "Which Is more Important, Carbon or Albedo? Optimizing Harvest Rotations for Timber and Climate Benefits in a Changing Climate," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 134-160, January.
    2. Price, Colin & Sjølie, Hanne Kathrine & Caurla, Sylvain & Yousefpour, Rasoul & Meilby, Henrik, 2020. "Optimal rotations with declining discount rate: incorporating thinning revenues and crop formation costs in a cross-European comparison," Forest Policy and Economics, Elsevier, vol. 118(C).
    3. Chang, Sun Joseph, 2020. "Twenty one years after the publication of the generalized Faustmann formula," Forest Policy and Economics, Elsevier, vol. 118(C).

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