Trees Or Trotters?
AbstractA real options model is used to explain why Irish farmers have been slow to switch from traditional farming to forestry despite numerous government incentives. In the theoretical model our results depend on profits from traditional farming relative to forestry. Under reasonable parameterisations of this profit ratio we show that it is optimal for farmers to stay in farming for six years before switching to forestry. In a subsequent empirical dynamic panel data model, the error correction model also predicts that it would take about six years for a change in the profit ratio to fully affect the number of hectares planted
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Bibliographic InfoPaper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1301003.
Date of creation: 2003
Date of revision:
error correction; forestry; panel data; real options;
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