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The Effect of Stochastic Oscillations in Property Rights Regimes on Forest Output in China

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  • Salant, Stephen W.

    ()
    (University of Michigan)

  • Yu, Xueying

    (University of Michigan)

Abstract

Over the past 60 years, forest tenure in China has oscillated unpredictably between private and common-property regimes. This policy-induced uncertainty has distorted land owners’ harvesting decisions and has lowered the value of China’s forest output. We provide an analytical framework for assessing these effects quantitatively and conclude that substantial losses in the net value of wood harvested over time have occurred. Understanding the consequences of this policy-induced uncertainty is particularly important since China is currently engaged in an ambitious plan to increase its domestic supply of timber. Contrary to the standard result in the literature that catastrophic risk—whether from natural disasters like forest fires or from government expropriation—necessarily leads to premature harvesting, we find that farmers may delay harvesting if sufficient compensation for loss is paid.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-13-08.

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Date of creation: 10 May 2013
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Handle: RePEc:rff:dpaper:dp-13-08

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Keywords: forest tenure risk; Faustmann model; optimal rotation period under uncertainty;

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  1. 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.
  2. Ping Qin & Fredrik Carlsson & Jintao Xu, 2011. "Forest Tenure Reform in China: A Choice Experiment on Farmers’ Property Rights Preferences," Land Economics, University of Wisconsin Press, vol. 87(3), pages 473-487.
  3. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2009. "Deforestation and land use under insecure property rights," Environment and Development Economics, Cambridge University Press, vol. 14(03), pages 281-303, June.
  4. Jonathan Yoder, 2004. "Playing with Fire: Endogenous Risk in Resource Management," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 933-948.
  5. Bergstrom, Clas & Loury, Glenn C & Persson, Mats, 1985. "Embargo Threats and the Management of Emergency Reserves," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 26-42, February.
  6. Yin, Runsheng & Newman, David H., 1997. "Impacts of rural reforms: the case of the Chinese forest sector," Environment and Development Economics, Cambridge University Press, vol. 2(03), pages 291-305, July.
  7. Villeneuve, Bertrand & Creti, Anna, 2013. "Commodity storage with durable shocks : A simple Markovian model," Economics Papers from University Paris Dauphine 123456789/5384, Paris Dauphine University.
  8. Bennett, Michael T., 2008. "China's sloping land conversion program: Institutional innovation or business as usual?," Ecological Economics, Elsevier, vol. 65(4), pages 699-711, May.
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