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ABSTRACT: We examine the implications of migration and insecure property rights to land use and deforestation in tropical frontier forests. Three forms of property rights risks are introduced to basic land-use forms. Illegal logging risk is associated with forest plantations, a land expropriation risk affects land in agriculture and plantation forestry, and illegal logging risks threaten native forest land. Public and private landowners can reduce these risks by employing costly enforcement effort. We show how that migration, expropriation, and illegal logging risks lead to deforestation by promoting agricultural expansion, and illegal logging. Higher public enforcement reduces illegal logging, but higher private enforcement may or may not reduce deforestation depending on migration pressures. Higher timber prices have an ambiguous effect on deforestation, but an increasing value of non-timber benefits decreases or leaves deforestation unchanged depending on the incentive structures of illegal loggers.
Environment and Development Economics 01/2009; 14(03):281-303. · 0.67 Impact Factor
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ABSTRACT: We study royalty reform in a timber concessions framework. Illegal logging in the form of underreporting of harvesting is
modeled. Harvesters can be either risk neutral or risk averse. Detection of illegal logging by the government is imperfect
and costly. We focus on the government’s policy problem, solving first for socially optimal royalty and auditing levels, and
then examining a revenue-neutral reform toward this benchmark. We find that higher royalty progression will always decrease
actual harvest volume regardless of risk preferences for the harvester, but the effect of a reform on reported harvest volume
is sensitive to the penalty scheme imposed by the government. If the fine is levied on evaded royalty payments, then higher
royalty progression may increase reported harvest volume. But when the fine is levied on undeclared harvest volume, the reverse
happens. Higher royalty regression increases actual harvest volume under both penalty schemes, but it may decrease reported
harvest volume. Higher regression will increase undeclared harvest volume when the fine is levied on evaded royalty payments.
Environmental and Resource Economics 09/2007; 38(2):189-211. · 1.52 Impact Factor
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ABSTRACT: We use a vertical product differentiation model under partial market coverage to study the social welfare optimum and duopoly equilibrium when convex costs of quality provision are either fixed or variable in terms of production. We show the following new results. First, under fixed costs, the social planner charges a uniform price for the single variant that just covers costs of quality provision. Like the duopoly equilibrium, this socially optimal pricing entails a partially uncovered market, but a smaller share of the market is served compared with the duopoly equilibrium. Second, for the variable cost case, it is socially optimal to provide both high- and low-quality variants, but market shares need not be equal. This differs from the result in fully covered markets. Third, in the duopoly equilibrium, the quality spread is too wide under variable costs relative to the social optimum. Under fixed costs, the duopoly produces two variants, but quality is too low relative to the social optimum, which has only one variant.
Bulletin of Economic Research 09/2005; 57(4):391 - 405. · 0.19 Impact Factor
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ABSTRACT: We propose a framework with endogenous allocation of land between agricultural production, sustainable forest management, and unsustainable forest exploitation in the form of illegal logging to explore deforestation and agricultural and timber supplies when property rights are insecure. Uncertainty over property rights arises through risk of confiscation on sustainably-managed forest land, and through illegal logging activities on frontier native forest land. Confiscation risk is shown to increase deforestation by increasing both land conversion to agriculture and illegal logging. Contrary to current wisdom, we find that higher timber prices do not necessarily lead to an increase in the land used for sustainable forestry, because higher prices stimulate illegal logging activity. Increased monitoring and stronger enforcement reduce illegal logging, and thus deforestation. Confiscation risk decreases timber supply from unsustainable forestry practices while the affect of timber price on timber supply is ambiguous.
02/2004;
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ABSTRACT: We study the socially optimal design of forest royalty and enforcement instruments in the case where concessions are allocated by a government, illegal logging incentives are present, and the government has available both area-based and value-based royalty instruments. When harvesters are risk neutral, the optimal policy mix depends on the presence of negative externalities and on the type of penalty scheme. For risk-averse harvesters the results differ. When the penalty is assessed on undeclared income, a royalty based subsidy is not optimal, but when penalties are levied on evaded royalty payments, the optimal royalty system may be progressive or regressive depending on the importance of the government's revenue constraint. Auditing is optimal regardless of the penalty scheme or presence of externalities, although its level differs. Accounting for negative externalities in the social welfare function implies a higher optimal royalty rate, but lower progression in the rate, and increased auditing.
CESifo Group Munich, CESifo Working Paper Series. 01/2004;
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ABSTRACT: We use a vertical product differentiation model under partial market coverage to study the social welfare optimum and duopoly equilibrium when convex costs of quality provision are either fixed or variable in terms of production. We show that, under fixed costs, at the social welfare optimum only one quality variant of the good is provided, while both variants are optimal under variable costs. In the duopoly equilibrium the quality spread is too wide under variable costs, but too narrow under fixed costs, relative to the social optimum. Finally, in both the fixed and variable cost cases, average quality provided by the duopoly equilibrium is too low from the perspective of a social welfare maximizer.
04/2003;
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ABSTRACT: This paper studies optimal forest policies in an overlapping generations forest economy with one-sided altruism, where timber and monetary bequests can be made across generations and forest amenities can be public goods. We extend the existing economics literature by demonstrating that timber bequests can dominate money bequests in many situations, and that timber bequests may even be operative in dynamically inefficient steady states. We also characterize the optimal policy mix, which maximizes long-run social welfare. This policy mix depends on the nature of the steady-state equilibrium, and whether non-landowners have full access to forest stocks to enjoy amenities. The results support the argument that bequests and forest stocks must be considered jointly in determining first- and second-best policies, although these are often analyzed in isolation. We also show that combinations of taxes and subsidies on harvesting and bequests may be efficient in a range of equilibria. The optimal policy mix we characterize in several types of steady states is not consistent with the choices governments typically make in practice.
Journal of Environmental Economics and Management 02/2002; · 2.17 Impact Factor
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ABSTRACT: This paper extends the Hartman model to study the optimal rotation age of two interdependent stands when the stream of amenities produces from the two stands may be complements or substitutes, both in space and over time. In the presence of stand interdependence both the ownership structure and the sequence of decision making matters. Rotation age choices are examined and compared under a variety of equilibria, including Nash, Stackelberg, and sole owner cases which differ as to the level of commitment by landowners to their choices. We show that the sole owner's rotation age is longer than the rotation age solved under both Nash and Stackelberg assumptions if the stands are spatial complements, but shorter if they are substitutes. The precise relationship between the Nash and Stackelberg rotation ages, and the qualitative properties of rotation ages in terms of timber prices, regeneration costs, and interest rates, also depend on how spatial substitutability and complementarity between stands evolves through time.
CESifo Group Munich, CESifo Working Paper Series. 01/2002;
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ABSTRACT: This paper studies in an overlapping generations forest economy the conditions under which money and/or timber bequests occur across generations, assuming the usual case of one-sided altruism. We assume nonindustrial landowners have preferences for consumption and for amenities from unharvested forest stock. Within this framework, we examine conditions under which landowners choose to leave timber or money bequests, and we show how taxation is important to these conditions. Empirical evidence from bequests decisions for a cross section sample of nonindustrial landowners in Virginia is then used to investigate the hypotheses suggested by the model with regard to the motive to leave bequests. The results are broadly consistent with the theoretical findings .
09/2001;
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ABSTRACT: We study the social welfare optimum for a vertically differentiated duopoly under partial market coverage and variable costs. Costs are specified as linear in quantity and quadratic in quality. We demonstrate that the spread of product quality observed under a profit maximizing duopoly is too high, relative to the social welfare optimum. We also find that high quality firms in a duopoly will have higher profits but lower market shares than low quality firms, after quality and price competition is resolved. Finally, we demonstrate that the social welfare optimum results in greater total output than the duopoly and has both firms producing equal amounts. Keywords: Product Differentiation, Partial Market Coverage, Social Welfare JEL Classification: L13, D60 2
07/2001;
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ABSTRACT: We examine the impact of investment in a "green" technology (eco-labeling) on a vertically differentiated duopoly. Investment in technologies is costly for firms, but it can affect positively both quality provision and consumers' willingness to pay. Hence, it provides a means for firms to differentiate products. A three stage Nash game is analyzed that includes: green technology investment, environmental quality provision, and price competition. We show several new results. First, the incentives to invest in high quality are reinforced if eco-labels increase consumer marginal willingness to pay for high quality goods, but lower quality firms have less incentive to invest in this case. Second, in the presence of environmental externalities related to low environmental quality provided in the market, high quality firms might underinvest in green technologies and also underprovide environmental quality. But, in the absence of environmental externalities, the spread of environmental quality across goods chosen under profit maximizing firms will be too high relative to the social optimum. Keywords: product differentiation, eco-labeling, investment in green technology. JEL classification: L13, H23, Q20. 3
07/2001;
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ABSTRACT: A three-stage game of investment, environmental quality provision and price competition is developed to study the impact of green technology investment (eco-labeling), in a duopoly model of vertical product differentiation. The firms’ incentives to invest in green technologies depend on their relative cost structure. When firms are identical with respect to fixed costs, both firms will always invest, but if one firm is more efficient in investing, then the other firm may or may not invest depending on the level of unit cost of investment. Quality competition will be tighter when the low-quality firm is more efficient, and looser when the high-quality firm is more efficient in investing. Socially optimal investment for both firms is always positive, but lower than in the duopoly solution. In the absence of environmental externalities, the quality dispersion chosen by profit maximizing firms may be too high or too low, while environmental externalities increase the possibility low-quality dispersion that is too low within the market solution. Finally, and importantly, ecolabeling can be used as a means of reducing excessive investment and increasing environmental quality that is too low.
Journal of Environmental Economics and Management.
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ABSTRACT: The field of forest economics has expanded rapidly in the last two decades, and yet there exists no up-to-date textbook for advanced undergraduate-graduate level use or rigorous reference work for professionals. Economics of Forest Resources fills these gaps, offering a comprehensive technical survey of the field with special attention to recent developments regarding policy instrument choice and uncertainty. It covers all areas in which mathematical models have been used to explain forest owner and user incentives and government behavior, introducing the reader to the rigor needed to think through the consequences of policy instruments. Technically difficult concepts are presented with a unified and progressive approach; an appendix outlines the basic concepts from calculus needed to understand the models and results developed. The book first presents the historical and classic models that every student or researcher in forest economics must know, including Faustmann and Hartman approaches, public goods, spatial interdependence, two period life-cycle models, and overlapping generations problems. It then discusses topics including policy instrument choice, deforestation, biodiversity conservation, and age class based forest modeling. Finally, it surveys such advanced topics as uncertainty in two-period models, catastrophic risk, stochastic control problems, deterministic optimal control, and stochastic and deterministic dynamic programming approaches. Boxes with empirical content illustrating applications of the theoretical material appear throughout. Each chapter is self-contained, allowing the reader, student, or instructor to use the text according to individual needs.
