IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v69y2018i4d10.1007_s10640-016-0098-z.html
   My bibliography  Save this article

Forest Value and Optimal Rotations in Continuous Cover Forestry

Author

Listed:
  • Jette Bredahl Jacobsen

    (University of Copenhagen
    University of Copenhagen)

  • Frank Jensen

    (University of Copenhagen)

  • Bo Jellesmark Thorsen

    (University of Copenhagen
    University of Copenhagen)

Abstract

The Faustmann forest rotation model is a celebrated contribution in economics. The model provides a forest value expression and allows a solution to the optimal rotation problem valid for perpetual rotations of even-aged forest stands. However, continuous forest cover forest management systems imply uneven-aged dynamics, and while a number of numerical studies have analysed specific continuous cover forest ecosystems in search of optimal management regimes, no one has tried to capture key dynamics of continuous cover forestry in simple mathematical models. In this paper we develop a simple, but rigorous mathematical model of the continuous cover forest, which strictly focuses on the area use dynamics that such an uneven-aged forest must have in equilibrium. This implies explicitly accounting for area reallocation and for weighting the productivity of each age class by the area occupied. We present results for unrestricted as well as area-restricted versions of the models. We find that land values are unambiguously higher in the continuous cover forest models compared with the even-aged models. Under area restrictions, the optimal rotation age in a continuous cover forest model is unambiguously lower than the corresponding area restricted Faustmann solution, while the result for the area unrestricted model is ambiguous.

Suggested Citation

  • Jette Bredahl Jacobsen & Frank Jensen & Bo Jellesmark Thorsen, 2018. "Forest Value and Optimal Rotations in Continuous Cover Forestry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 713-732, April.
    • Handle: RePEc:kap:enreec:v:69:y:2018:i:4:d:10.1007_s10640-016-0098-z
    DOI: 10.1007/s10640-016-0098-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10640-016-0098-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10640-016-0098-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gregory S. Amacher & Markku Ollikainen & Erkki A. Koskela, 2009. "Economics of Forest Resources," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012480, April.
    2. Courtland L. Washburn & Clark S. Binkley, 1993. "Do Forest Assets Hedge Inflation?," Land Economics, University of Wisconsin Press, vol. 69(3), pages 215-224.
    3. Courtland L. Washburn & Clark S. Binkley, 1990. "On the Use of Period-Average Stumpage Prices to Estimate Forest Asset Pricing Models," Land Economics, University of Wisconsin Press, vol. 66(4), pages 379-393.
    4. Thorsen, Bo Jellesmark, 19. "Risk, returns and possible speculative bubbles in the price of Danish forest land?," Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, Scandinavian Society of Forest Economics, issue 43, May.
    5. Tommy Lundgren, 2005. "Assessing the Investment Performance of Swedish Timberland: A Capital Asset Pricing Model Approach," Land Economics, University of Wisconsin Press, vol. 81(3).
    6. Heaps, Terry, 1984. "The forestry maximum principle," Journal of Economic Dynamics and Control, Elsevier, vol. 7(2), pages 131-151, May.
    7. Schou, Erik & Jacobsen, Jette Bredahl & Kristensen, Kristian Løkke, 2012. "An economic evaluation of strategies for transforming even-aged into near-natural forestry in a conifer-dominated forest in Denmark," Forest Policy and Economics, Elsevier, vol. 20(C), pages 89-98.
    8. Jacobsen, Jette Bredahl & Helles, Finn, 2006. "Adaptive and nonadaptive harvesting in uneven-aged beech forest with stochastic prices," Forest Policy and Economics, Elsevier, vol. 8(3), pages 223-238, April.
    9. Newman, D.H., 2002. "Forestry's golden rule and the development of the optimal forest rotation literature," Journal of Forest Economics, Elsevier, vol. 8(1), pages 5-27.
    10. Neher,Philip A., 1990. "Natural Resource Economics," Cambridge Books, Cambridge University Press, number 9780521311748, September.
    11. Samuelson, Paul A, 1976. "Economics of Forestry in an Evolving Society," Economic Inquiry, Western Economic Association International, vol. 14(4), pages 466-492, December.
    12. Hartman, Richard, 1976. "The Harvesting Decision When a Standing Forest Has Value," Economic Inquiry, Western Economic Association International, vol. 14(1), pages 52-58, March.
    13. Brukas, Vilis & Jellesmark Thorsen, Bo & Helles, Finn & Tarp, Peter, 2001. "Discount rate and harvest policy: implications for Baltic forestry," Forest Policy and Economics, Elsevier, vol. 2(2), pages 143-156, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koster, Roman & Fuchs, Jasper M., 2022. "Opportunity costs of growing space – an essential driver of economical single-tree harvest decisions," Forest Policy and Economics, Elsevier, vol. 135(C).
    2. Hennessy, David A. & Zhang, Jing & Bai, Na, 2019. "Animal health inputs, endogenous risk, general infrastructure, technology adoption and industrialized animal agriculture," Food Policy, Elsevier, vol. 83(C), pages 355-362.
    3. Evison, David & Bloomberg, Mark & Walker, Liam & Howley, Matt, 2024. "The economics of managing a small-scale radiata pine forest using target diameter harvesting," Forest Policy and Economics, Elsevier, vol. 161(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Morag F. Macpherson & Adam Kleczkowski & John Healey & Nick Hanley, 2015. "When to harvest? The effect of disease on optimal forest rotation," Discussion Papers in Environment and Development Economics 2015-19, University of St. Andrews, School of Geography and Sustainable Development.
    2. Newman, D.H., 2002. "Forestry's golden rule and the development of the optimal forest rotation literature," Journal of Forest Economics, Elsevier, vol. 8(1), pages 5-27.
    3. Creamer, Selmin F. & Genz, Alan & Blatner, Keith A., 2012. "The Effect of Fire Risk on the Critical Harvesting Times for Pacific Northwest Douglas-Fir When Carbon Price Is Stochastic," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), pages 1-14, December.
    4. Morag F. Macpherson & Adam Kleczkowski & John R. Healey & Nick Hanley, 2018. "The Effects of Disease on Optimal Forest Rotation: A Generalisable Analytical Framework," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(3), pages 565-588, July.
    5. Macpherson, Morag F. & Kleczkowski, Adam & Healey, John R. & Hanley, Nick, 2017. "Payment for multiple forest benefits alters the effect of tree disease on optimal forest rotation length," Ecological Economics, Elsevier, vol. 134(C), pages 82-94.
    6. Xu, Ying & Amacher, Gregory S. & Sullivan, Jay, 2016. "Optimal forest management with sequential disturbances," Journal of Forest Economics, Elsevier, vol. 24(C), pages 106-122.
    7. Gardner Brown, 2000. "Renewable Natural Resource Management and Use Without Markets," Working Papers 0025, University of Washington, Department of Economics.
    8. Knoke, Thomas & Paul, Carola & Härtl, Fabian, 2017. "A critical view on benefit-cost analyses of silvicultural management options with declining discount rates," Forest Policy and Economics, Elsevier, vol. 83(C), pages 58-69.
    9. Sahashi, Yoshinao, 2002. "The convergence of optimal forestry control," Journal of Mathematical Economics, Elsevier, vol. 37(3), pages 179-214, May.
    10. Ken-Ichi Akao, 2011. "Optimum forest program when the carbon sequestration service of a forest has value," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(4), pages 323-343, December.
    11. Chang, Sun Joseph, 2020. "Twenty one years after the publication of the generalized Faustmann formula," Forest Policy and Economics, Elsevier, vol. 118(C).
    12. Harou, Patrice A. & Zheng, Chinlong & Zhang, Daowei, 2013. "The Alternative Test in forestry," Forest Policy and Economics, Elsevier, vol. 34(C), pages 41-46.
    13. Gardner M. Brown, 2000. "Renewable Natural Resource Management and Use without Markets," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 875-914, December.
    14. Barreal, Jesús & Loureiro, Maria L. & Picos, Juan, 2014. "On insurance as a tool for securing forest restoration after wildfires," Forest Policy and Economics, Elsevier, vol. 42(C), pages 15-23.
    15. Petucco, Claudio & Andrés-Domenech, Pablo, 2018. "Land expectation value and optimal rotation age of maritime pine plantations under multiple risks," Journal of Forest Economics, Elsevier, vol. 30(C), pages 58-70.
    16. Foppert, John D., 2024. "The discount rate differential required for harvesting-by-dice-rolling to outperform optimal rotation planning," Forest Policy and Economics, Elsevier, vol. 160(C).
    17. Ben Abdallah, Skander & Lasserre, Pierre, 2016. "Asset retirement with infinitely repeated alternative replacements: Harvest age and species choice in forestry," Journal of Economic Dynamics and Control, Elsevier, vol. 70(C), pages 144-164.
    18. Schou, Erik & Jacobsen, Jette Bredahl & Kristensen, Kristian Løkke, 2012. "An economic evaluation of strategies for transforming even-aged into near-natural forestry in a conifer-dominated forest in Denmark," Forest Policy and Economics, Elsevier, vol. 20(C), pages 89-98.
    19. Nguyen, Trung Thanh & Nghiem, Nhung, 2016. "Optimal forest rotation for carbon sequestration and biodiversity conservation by farm income levels," Forest Policy and Economics, Elsevier, vol. 73(C), pages 185-194.
    20. Parajuli, Rajan & Chang, Sun Joseph, 2015. "Real Assets and Inflation: Which Real Assets Hedge Inflation," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205283, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Capital budgeting; Faustmann rotation model; Uneven-aged forest management;
    All these keywords.

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:69:y:2018:i:4:d:10.1007_s10640-016-0098-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.