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Trees Or Trotters?

Author Info

Listed author(s):
  • Maurice Roche

    ()

    (Economics, National University of Ireland, Maynooth)

  • JASMINA BEHAN,

    (FAS, The Training & Employment Authority, Ireland)

  • KIERAN MCQUINN

    (Central Bank of Ireland, Dame Street, Dublin 2, Ireland)

Abstract

A 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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File URL: http://repec.maynoothuniversity.ie/mayecw-files/N1301003.pdf
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Paper 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.

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Date of creation: 2003
Handle: RePEc:may:mayecw:n1301003
Contact details of provider: Postal:
Maynooth, Co. Kildare

Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting

More information through EDIRC

Keywords: error correction; forestry; panel data; real options;

References listed on IDEAS
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  1. Alig, Ralph J. & Adams, Darius M. & McCarl, Bruce A., 1998. "Impacts of Incorporating Land Exchanges Between Forestry and Agriculture in Sector Models," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(02), pages 389-401, December.
  2. Abebayehu Tegene & Keith Wiebe & Betsey Kuhn, 1999. "Irreversible Investment Under Uncertainty: Conservation Easements and the Option to Develop Agricultural Land," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 203-219.
  3. Brent Sohngen & Robert Mendelsohn, 2003. "An Optimal Control Model of Forest Carbon Sequestration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 448-457.
  4. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
  5. Behan, Jasmine & McQuinn, Kieran, 2003. "Projecting Net Greenhouse Gas Emissions from Irish Agriculture and Forestry," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2003(1-Spring), pages 1-11.
  6. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  7. Siobhan McCarthy & Alan Matthews & Brendan Riordan, 2002. "Determinants of Private Afforestation in the Republic of Ireland," Trinity Economics Papers 20023, Trinity College Dublin, Department of Economics.
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