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Land allocation between a multiple-stand forest and agriculture under storm risk and recursive preferences

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  • Gaspard Dumollard
  • Stéphane De Cara

Abstract

This study aims to characterise steady-state land allocations between a multiple-stand forest and agriculture, when the forest is subject to a storm risk. The landowner is supposed to have recursive preferences, which permits to distinguish between intertemporal preferences and risk preferences. Using a stochastic dynamic programming model, we show that both land allocation and forest management depend on the risk and on both types of preferences at the steady-state. Risk aversion is shown to favour land allocation to agriculture and to reduce the forest average harvest age while the preference for a regular income is shown to favour forestry and to reduce the average harvest age.

Suggested Citation

  • Gaspard Dumollard & Stéphane De Cara, 2018. "Land allocation between a multiple-stand forest and agriculture under storm risk and recursive preferences," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 7(3), pages 256-268, July.
  • Handle: RePEc:taf:teepxx:v:7:y:2018:i:3:p:256-268
    DOI: 10.1080/21606544.2017.1409654
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    1. Marielle Brunette & Jérôme Foncel & Nazindigouba Eric Kéré, 2014. "Attitude towards Risk and Production Decision: An Empirical analysis on French private forest owners," Working Papers halshs-00981350, HAL.
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    6. 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.
    7. Seppo Salo & Olli Tahvonen, 2004. "Renewable Resources with Endogenous Age Classes and Allocation of Land," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 513-530.
    8. Couture, Stéphane & Reynaud, Arnaud, 2011. "Forest management under fire risk when forest carbon sequestration has value," Ecological Economics, Elsevier, vol. 70(11), pages 2002-2011, September.
    9. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711.
    10. Salo, Seppo & Tahvonen, Olli, 2002. "On Equilibrium Cycles and Normal Forests in Optimal Harvesting of Tree Vintages," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 1-22, July.
    11. Spence, Michael & Zeckhauser, Richard J, 1972. "The Effect of the Timing of Consumption Decisions and the Resolution of Lotteries on the Choice of Lotteries," Econometrica, Econometric Society, vol. 40(2), pages 401-403, March.
    12. Stavins, Robert N & Jaffe, Adam B, 1990. "Unintended Impacts of Public Investments on Private Decisions: The Depletion of Forested Wetlands," American Economic Review, American Economic Association, vol. 80(3), pages 337-352, June.
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