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Designing Voluntary Subsidies for Forest Owners under Imperfect Information

Author

Listed:
  • Frank Jensen

    (IFRO - Institute of Food and Resource Economics [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet)

  • Bo Jellesmark Thorsen

    (IFRO - Institute of Food and Resource Economics [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet)

  • Jens Abildtrup

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Jette Bredahl Jacobsen

    (IFRO - Institute of Food and Resource Economics [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet)

  • Anne Stenger

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

In this paper, we study voluntary subsidies offered to forest owners to increase rotation periods. We assume that a forest owner takes private amenity values into account when making decisions, but these values are lower than the social amenity values; therefore, an amenity value externality arises. Furthermore, the regulator has imperfect information regarding the timber profit of the forest owner. We show that voluntary subsidies must reflect the difference between (a) private and social amenity values and (b) timber profit among the possible types of the forest owner. In this way, we solve the amenity value externality and the problem of imperfect information about timber profit in a second-best optimal way. We have also investigated what happens if the regulator excludes private amenity values when fixing voluntary subsidies and we show that two sources of efficiency losses arise: (a) non-optimal rotation periods and (b) non-truthful revelation of private information.

Suggested Citation

  • Frank Jensen & Bo Jellesmark Thorsen & Jens Abildtrup & Jette Bredahl Jacobsen & Anne Stenger, 2022. "Designing Voluntary Subsidies for Forest Owners under Imperfect Information," Post-Print hal-03702382, HAL.
    • Handle: RePEc:hal:journl:hal-03702382
    DOI: 10.1561/112.00000541
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    Cited by:

    1. Lautrup, M. & Panduro, T.E. & Olsen, J.V. & Pedersen, M.F. & Jacobsen, J.B., 2023. "Is there more to trees than timber? Estimating the private amenity value of forests using a hedonic land model for combined agricultural properties," Forest Policy and Economics, Elsevier, vol. 146(C).
    2. Radek Rinn & Vilém Jarský, 2022. "Analysis of Financial Support for Forestry in the Czech Republic from the Perspective of Forest Bioeconomy," Sustainability, MDPI, vol. 14(23), pages 1-25, November.

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