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Risk preferences, risk perceptions and timber harvest decisions -- An empirical study of nonindustrial private forest owners in northern Sweden

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  • Andersson, Mats
  • Gong, Peichen

Abstract

A mail survey of nonindustrial private forest (NIPF) owners in two counties in northern Sweden was conducted to investigate the risk preferences of NIPF owners and their perceptions of the return and risk of timber investment relative to investment alternatives outside forestry. We also used the data collected from the survey to examine the relationship between the stated preferences, subjective judgements, and the observed and planned timber fellings. Our aim was to determine as to what extent the NIPF owners' harvesting behaviour was consistent with their preferences and subjective judgments. The result shows that a majority of the NIPF owners who responded to the survey were risk-neutral or risk-prone. There were no statistically significant correlations between a forest owner's attitudes toward risk and the size of forest property. However, risk preferences have significant impacts on the decision to fell: the more a forest owner likes to take risks, the more likely it is that he/she conducts final felling. The result also shows large variations among NIPF owners with respect to the subjective judgements of the return and risk of the alternative investments. For each respondent we elicited the most preferred investment alternative based on the stated risk preferences and the subjective judgements of the return and risk of the alternative investments. Owners whose preferred investment alternative is the mature forest are on average significantly less active in harvesting than owners with other preferred investment alternatives. However, there are no significant differences in the felling intensity and the growing stock of timber among the different groups of NIPF owners. The examination of NIPF owners' harvesting behaviour, risk preferences and subjective judgments reveals strong indications of the difficulties for NIPF owners to make rational decisions when faced with uncertainties.

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  • Andersson, Mats & Gong, Peichen, 2010. "Risk preferences, risk perceptions and timber harvest decisions -- An empirical study of nonindustrial private forest owners in northern Sweden," Forest Policy and Economics, Elsevier, vol. 12(5), pages 330-339, June.
    • Handle: RePEc:eee:forpol:v:12:y:2010:i:5:p:330-339
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