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Attitude towards Risk and Production Decision: An Empirical analysis on French private forest owners

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Author Info

  • Marielle Brunette

    (INRA - INRA Laboratoire d'Economie Forestière - INRA)

  • Jérôme Foncel

    (Université Lille 3 - Université Lille 3 - université Lille 3)

  • Eric Nazindigouba Kéré

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

Abstract

This paper deals with the forest owner's attitude towards risk and the harvesting decision in several ways. First, we propose to characterize and quantify the forest owner's attitude towards risk. Second, we analyze the determinants of the forest owner's risk attitude. Finally, we determine the impact of the forest owner's risk attitude on the harvesting decision. The French forest owner's risk attitude is tackled by implementing a questionnaire, including a context-free measure borrowed from experimental economics. The determinants of the forest owner's risk attitude and harvesting decision are estimated through a recursive bivariate ordered probit model. We show that French forest owners are characterized by a relative risk aversion coefficient close to 1. In addition, we found that the forest owner's risk aversion is influenced positively and significantly by gender (female), age, and willingness to protect the environment, while the percentage of forest income in the total patrimony of the forest owner has a negative effect. Finally, we obtain that the forest owner's risk aversion positively and significantly impacts the harvesting decision.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-01005200.

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Date of creation: 12 Jun 2014
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Handle: RePEc:hal:wpaper:halshs-01005200

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Keywords: Forest owner's risk attitude; Risk aversion; Harvesting decision.;

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  1. Harry R Clarke & William J. Reed, 1989. "The Tree-Cutting Problem in a Stochastic Environment: The case of Age Dependent Growth," Working Papers 1989.01, School of Economics, La Trobe University.
  2. Størdal, Ståle & Lien, Gudbrand & Baardsen, Sjur, 2008. "Analyzing determinants of forest owners' decision-making using a sample selection framework," Journal of Forest Economics, Elsevier, Elsevier, vol. 14(3), pages 159-176, June.
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  15. Bill Provencher, 1997. "Structural Versus Reduced-Form Estimation of Optimal Stopping Problems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(2), pages 357-368.
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