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Hedging Strategies in Forest Management

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Author Info
Marielle Brunette (BETA-REGLES, Université Nancy 2-CNRS)
Stephane Couture () (Laboratoire d'Economie Forestière, INRA - AgroParisTech)
Eric Langlais (UFR Administration Economique et Sociale, Université de Nancy)

Additional information is available for the following registered author(s):

Abstract

The paper focuses on the choice of forest management strategies for natural hazards by nonindustrial owners, when forest provides nontimber services. We introduce a basic two-period model where the private owner hedges against natural hazards on his/her forest thanks to financial strategies (accumulation of savings) or to the adoption of sylvicultural practices. We show that: 1/ the harvesting rule, in the presence of amenity services and a random growth rate for forest, is smaller than the one predicted under the Faustmann’s rule; 2/ savings and sylvicultural pratices may be seen as perfectly substitutable tools. However, our analysis predicts that, depending on whether forest owners opt for the financial strategy or undertake sylvicultural practices, the harvesting rule displays a specific sensitivity to price effects and/or changes in the distribution of natural hazards.

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File URL: http://www.nancy.inra.fr/lef/content/download/2907/28858/version/1/file/doc_LEF_n2007-07.pdf
File Format: application/pdf
File Function: First version, 2007
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Publisher Info
Paper provided by Laboratoire d'Economie Forestiere, AgroParisTech-INRA in its series Working Papers - Cahiers du LEF with number 2007-07.

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Length: 26 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:lef:wpaper:2007-07

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Related research
Keywords: Risk; Forest; Amenities; Savings and Sylvicultural practices;

Other versions of this item:

Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters

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. Lee, Kangoh, 1998. "Risk Aversion and Self-Insurance-cum-Protection," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 139-50, November. [Downloadable!] (restricted)
  2. Reed, William J., 1984. "The effects of the risk of fire on the optimal rotation of a forest," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 180-190, June. [Downloadable!] (restricted)
  3. ERKKI Koskela & MARKKU Ollikainen, 1997. "Optimal Design of Forest Taxation with Multiple-Use Characteristics of Forest Stands," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(1), pages 41-62, July. [Downloadable!] (restricted)
  4. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug.. [Downloadable!] (restricted)
  5. repec:kap:empiri:v:32:y:2007:i:1:p:61-90 is not listed on IDEAS
  6. Marianne Zandersen & Richard S.J. Tol, 2005. "A Meta-analysis of Forest Recreation Values in Europe," Working Papers FNU-86, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2005. [Downloadable!]
  7. Hartman, Richard, 1976. "The Harvesting Decision When a Standing Forest Has Value," Economic Inquiry, Oxford University Press, vol. 14(1), pages 52-58, March.
  8. GOLLIER, Christian, 2002. "Optimal Prevention of Unknown Risks: A Dynamic Approach with Learning," IDEI Working Papers 139, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  9. Max, Wendy & Lehman, Dale E., 1988. "A behavioral model of timber supply," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 71-86, March. [Downloadable!] (restricted)
  10. Gregory S. Amacher & Arun S. Malik & Robert G. Haight, 2005. "Not Getting Burned: The Importance of Fire Prevention in Forest Management," Land Economics, University of Wisconsin Press, vol. 81(2). [Downloadable!] (restricted)
  11. Englin, Jeffrey & Boxall, Peter & Hauer, Grant, 2000. "An Empirical Examination Of Optimal Rotations In A Multiple-Use Forest In The Presence Of Fire Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July. [Downloadable!]
  12. Helge Braun & Winfried Koeniger, 2007. "On the role of market insurance in a dynamic model," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 32(1), pages 61-90, June. [Downloadable!] (restricted)
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