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Spatio-Temporal Modeling of Lightning Fires on Forestland: A Compensation Scheme

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  • Chen, Xuan
  • Goodwin, Barry K.

Abstract

In the US forestry industry, wildfire has always been one of the leading causes of damage. This topic is of growing interest as wildfire has caused huge losses in recent years. Among all causes, lightning has always been the leading hazard. Unlike human related wildfires for which timber owners may be able to trace the responsible persons to claim losses, forestland owners essentially have no means to recover their losses against lightning-induced wildfire. In light of the fact that there are very few risk management instruments available to compensate timber losses. Following this line of inquiry, our paper studies risks of lightning induced wildfire, conditioning on crucial informational variables, across both spatial units and time periods. A non-parametric bootstrapping method is used to quantify the risks. Some relevant observable variables, such as environment and climate factors, are found to be statistically significant factors related to wildfire risks. A group index insurance scheme has been proposed and its associated actuarially fair premium rates have been estimated. Implications for wildfire management policies are also discussed.

Suggested Citation

  • Chen, Xuan & Goodwin, Barry K., 2013. "Spatio-Temporal Modeling of Lightning Fires on Forestland: A Compensation Scheme," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151285, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:151285
    DOI: 10.22004/ag.econ.151285
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    References listed on IDEAS

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    1. Barry K. Goodwin & Ligia A. Vado, 2007. "Public Responses to Agricultural Disasters: Rethinking the Role of Government," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(4), pages 399-417, December.
    2. Jeffrey P. Prestemon & David T. Butry, 2005. "Time to Burn: Modeling Wildland Arson as an Autoregressive Crime Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 756-770.
    3. Holecy, Jan & Hanewinkel, Marc, 2006. "A forest management risk insurance model and its application to coniferous stands in southwest Germany," Forest Policy and Economics, Elsevier, vol. 8(2), pages 161-174, March.
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