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Farm Forestry Investment in Ireland Under Uncertainty

  • Emily Wiemers

    (Teagasc, Dublin)

  • Jasmina Behan

    (FÁS, Dublin)

Registered author(s):

    This paper develops a model to explain farmers’ decision to move from agricultural activities to forestry. Farmers in Ireland have strong links with land and are reluctant to enter into forestry even when the returns from it exceed those from farming. This paper examines whether the reluctance among farmers to plant forestry originates in the nature of forestry investment, which is characterised by the irreversibility of the decision, the uncertainty about future returns, and the ability to delay investment in forestry. In this paper we use a real options method and focus on the contribution of uncertainty in returns and costs to the decision to invest in forestry.

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    File URL: http://www.esr.ie/Vol35%203/Vol%2035_3Wiemer.pdf
    File Function: First version, 2004
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    Article provided by Economic and Social Studies in its journal Economic and Social Review.

    Volume (Year): 35 (2004)
    Issue (Month): 3 ()
    Pages: 305-320

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    Handle: RePEc:eso:journl:v:35:y:2004:i:3:p:305-320
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    1. Dixit, Avinash K, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 205-28, May.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474, April.
    3. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
    4. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
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