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Farm Forestry Investment in Ireland Under Uncertainty

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Author Info

  • Emily Wiemers

    (Teagasc, Dublin)

  • Jasmina Behan

    (FÁS, Dublin)

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    Abstract

    This paper develops a model to explain farmers’ decision to move from agricultural activities to forestry. Farmers in Ireland have strong links with land and are reluctant to enter into forestry even when the returns from it exceed those from farming. This paper examines whether the reluctance among farmers to plant forestry originates in the nature of forestry investment, which is characterised by the irreversibility of the decision, the uncertainty about future returns, and the ability to delay investment in forestry. In this paper we use a real options method and focus on the contribution of uncertainty in returns and costs to the decision to invest in forestry.

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    File URL: http://www.esr.ie/Vol35%203/Vol%2035_3Wiemer.pdf
    File Function: First version, 2004
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    Bibliographic Info

    Article provided by Economic and Social Studies in its journal Economic and Social Review.

    Volume (Year): 35 (2004)
    Issue (Month): 3 ()
    Pages: 305-320

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    Handle: RePEc:eso:journl:v:35:y:2004:i:3:p:305-320

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    Web page: http://www.esr.ie

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    References

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    1. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
    2. Dixit, Avinash K, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 205-28, May.
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    Cited by:
    1. James Breen & Darragh Clancy & Brian Moran & Fiona Thorne, 2009. "Modelling the potential supply of energy crops in Ireland: results from a probit model examining the factors affecting willingness to adopt," Working Papers 0905, Rural Economy and Development Programme,Teagasc.
    2. Stefanie Engel & Charles Palmer & Luca Taschini & Simon Urech, 2012. "Cost-effective payments for reducing emissions from deforestation under uncertainty," Grantham Research Institute on Climate Change and the Environment Working Papers 72, Grantham Research Institute on Climate Change and the Environment.
    3. Duesberg, Stefanie & Upton, Vincent & O'Connor, Deirdre & Dhubháin, Áine Ní, 2014. "Factors influencing Irish farmers' afforestation intention," Forest Policy and Economics, Elsevier, vol. 39(C), pages 13-20.
    4. Clancy, Daragh & Breen, James P. & Butler, Anne Marie & Thorne, Fiona S., 2008. "The economic viability of biomass crops versus conventional agricultural systems and its potential impact on farm incomes in Ireland," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6485, European Association of Agricultural Economists.

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