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Hedging strategies in forest management

Author

Listed:
  • Marielle Brunette

    (LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech, BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Couture

    (LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech)

  • Éric E. Langlais

    (UFR AES - UFR Administration Economique et Sociale - Université Nancy 2)

Abstract

The paper focuses on the choice of forest management strategies for natural hazards by nonindustrial owners, when forest provides nontimber services. We introduce a basic two-period model where the private owner hedges against natural hazards on his/her forest thanks to financial strategies (accumulation of savings) or to the adoption of sylvicultural practices. We show that: 1/ the harvesting rule, in the presence of amenity services and a random growth rate for forest, is smaller than the one predicted under the Faustmann's rule; 2/ savings and sylvicultural pratices may be seen as perfectly substitutable tools. However, our analysis predicts that, depending on whether forest owners opt for the financial strategy or undertake sylvicultural practices, the harvesting rule displays a specific sensitivity to price effects and/or changes in the distribution of natural hazards.

Suggested Citation

  • Marielle Brunette & Stéphane Couture & Éric E. Langlais, 2020. "Hedging strategies in forest management," Working Papers hal-01189403, HAL.
    • Handle: RePEc:hal:wpaper:hal-01189403
    Note: View the original document on HAL open archive server: https://hal.science/hal-01189403
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk; Forest; Amenities; Savings and Sylvicultural practices; Risque; Forêt; Aménités; Épargne et pratiques sylvicoles;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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