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On the Elasticities of Harvesting Rules

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Author Info
Fwu-Ranq Chang ()

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Abstract

In this paper, we rank the relative importance of the exogenous parameters upon the optimal harvesting size in a stochastic rotation problem. We show that when the tree growth follows geometric Brownian motion, the harvesting size is most elastic to the harvesting cost, followed by the interest rate, and is least elastic to the parameters of tree growth. Similar ranking holds for the linear growth case. In both cases the harvesting size is increasing and concave in the harvesting cost, bounded between two parallel lines. The harvesting decision is made according to a stochastic extension of the Faustmann formula.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1082.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1082

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Related research
Keywords: stochastic rotation problem; the Faustmann formula; site value; homogeneity conditions; and seedling value;

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Find related papers by JEL classification:
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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  1. Luis H. R. Alvarez & Erkki Koskela, 2004. "Does Risk Aversion Accelerate Optimal Forest Rotation under Uncertainty?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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