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Another reconciliation between economists and forestry experts: OLG-arguments

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Author Info
Karl-Gustaf Löfgren
Abstract

Foresters often claim that the goal of good forest policy is to have a sustained forest yield, or even a maximum sustainable yield. They also claim that people wish to save a few extra trees for their children. This bequest motive is not modelled in the standard approach to the optimal rotation problem. In this paper, we present a standard version of an overlapping generation model augmented with a simple tree technology. We show in particular that the market equilibrium can be dynamically inefficient, and that a bequest motive in terms of trees can correct for the overaccumulation of capital that causes the inefficiency. The bequest motive also enables us to account for a harvesting intensity varying with age (young people typically cut more than elderly people) in spite of a perfect capital market. The crux of the argument is that a bequest motive is likely to increase the equilibrium interest rate and move the economy away from a maximum sustainable yield policy. It, however, improves efficiency and is able to explain empirical regularities that are not easily explained by a traditional perfect capital market approach to forestry. Copyright Kluwer Academic Publishers 1991

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File URL: http://hdl.handle.net/10.1007/BF00305952
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 1 (1991)
Issue (Month): 1 (March)
Pages: 83-95
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Handle: RePEc:kap:enreec:v:1:y:1991:i:1:p:83-95

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Related research
Keywords: Sustained forest yield; optimal rotation; overlapping generations; bequest motive;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kemp, Murray C & Long, Ngo Van, 1979. "The Under- Exploitation of Natural Resources: A Model with Overlapping Generations," The Economic Record, The Economic Society of Australia, vol. 55(150), pages 214-21, September.
  2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467. [Downloadable!] (restricted)
  3. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December. [Downloadable!] (restricted)
  4. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, vol. 4(2), pages 200-223, April. [Downloadable!] (restricted)
  5. Samuelson, Paul A, 1976. "Economics of Forestry in an Evolving Society," Economic Inquiry, Oxford University Press, vol. 14(4), pages 466-92, December.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Markku Ollikainen, 1998. "Sustainable Forestry: Timber Bequests, Future Generations and Optimal Tax Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(3), pages 255-273, October. [Downloadable!] (restricted)
  2. Thomas Wagner, 1998. "Limits and Cycles of Environmental Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(2), pages 155-175, March. [Downloadable!] (restricted)
  3. Gregroy Amacher & Richard Brazee & Erkki Koskela & Markku Ollikainen, 1999. "Taxation, Bequests, and Short and Long Run Timber Supplies: An Overlapping Generations Problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(3), pages 269-288, April. [Downloadable!] (restricted)
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