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Forest owners' associations as a case of joint production of public goods and private services: a game-theoretical approach
Abstract
Taking the case of forest owners’ associations in Northern Portugal, this paper presents some models describing the behaviour of these institutions in a setting where the challenge
is to motivate for active forest management absentee private forest owners. The models are framed as non co-operative games between the owners and the directors. The income of each owner and the utility of the directors depend on the services provided by the association. In the first “Portuguese” model these services assumed to be public goods are financed only by fixed membership fees and by the fund raising efforts of the directors. In the second "Portuguese" model private services provision is included. This is compared with the “Scandinavian” model where the owners pay a share of their timber sales. In the first Portuguese” model the directors have a dominant strategy equilibrium which is not the case in the other two models. In all the three models the effect the association’s services have on the owners’ absenteeism depends on the type of technical interdependence between this factor and the owners’ forest management time. For the second
“Portuguese” model a characterisation of the optimal price policy for the private services is provided.
... As contribuições financeiras dos associados correspondem geralmente a quotas com um valor anual fixo independente da quantidade e qualidade dos serviços que a associação lhes presta. Já demonstrei teoricamente numa outra ocasião (Mendes, 1997c) e é possível comprovar por evidência empírica que este tipo de contribuições tem o efeito perverso de não incentivar os gestores das ADLR´s a cuidar dos efeitos produtivos dos serviços da associação na actividade económica dos associados, desinteressando também estes do desempenho da associação. ...
... Um sistema alternativo sem estes efeitos perversos seria aquele em que as contribuições dos associados para a associação estariam ligadas ao volume da sua actividade económica (Mendes, 1997c). ...
... The company ended up being sold to a foreign group with interests in the cork business until being finally bought by the major industrial group in the cork industry. Briefly, what we can say about the current state of primary functions of the existing forest owners' organisations is that those functions tend to develop in areas where there is some kind of strategic complementarity between the services provided by the organisations and the capabilities of their members (Mendes, 1998Mendes, , 2001): a) forest owners, specially in the middle ranges of forest holding sizes, have some demand and willingness to pay for technical assistance to apply for public incentives to forestry and for services reducing the risk of forest fires, but left on their own, it would be very difficult for them to go forward in these directions; ...
... Briefly, what we can say about the current state of primary functions of the existing forest owners' organizations is that those functions tend to develop in areas where there is some kind of strategic complementarity between the services provided by the organizations and the capabilities of their members (Mendes, 1998Mendes, , 2001): a) forest owners, specially in the middle ranges of forest holding sizes, have some demand and willingness to pay for technical assistance to apply for public incentives to forestry and for services reducing the risk of forest fires, but left on their own, it would be very difficult for them to go forward in these directions; b) forest owners' organizations have a staff capable to respond to those demands and which can be sustained by the fees paid by the members they assist combined with the financial assistance the organization can get from the public authorities. With their current dimension and capabilities the forest owners' organizations hardly can go much beyond these two kinds of primary functions (technical assistance in forest investments and management, and preventive silvicultural works). ...
... Briefly, what we can say about the current state of primary functions of the existing forest owners' organisations is that those functions tend to develop in areas where there is some kind of strategic complementarity between the services provided by the organisations and the capabilities of their members (Mendes, 1998b): a) forest owners, specially in the middle ranges of forest holding sizes, have some demand and willingness to pay for technical assistance to apply for public incentives to forestry and for services reducing the risk of forest fires, but left on their own, it would be very difficult for them to go forward in these directions; b) forest owners' organisations have a staff capable to respond to those demands and which can be sustained by the fees paid by the members they assist combined with the financial assistance the organisation can get from the public authorities. With their current dimension and capabilities the forest owners' organisations hardly can go much beyond these two kinds of primary functions (technical assistance in forest investments and management, and preventive silvicultural works). ...
The evidence provided in this report shows that the Portuguese forest sector has been responsive to demands for its products, not only timber, but also cork and some other non wood forest goods and services. The area of forests almost tripled since the mid of the 1990s and the main cause of this has been that response to market conditions. Given the very high salience of private ownership, private forest owners played a major role in that response, even when there were no supported public policies, which was the case until the 1980s. Private forest owners obviously have not been alone in making up these
adjustments to demand. Forest industries have been the essential connecting link between the forests and the final consumers, either in the domestic markets, or abroad.
The first jump in expanding the forest resource base was the installation of the cork oak stands in the southern regions, mostly from the mid of the XIXth century until the mid of the XXth century. This was and still remains an export oriented business. It has successfully resisted the arrival of plastics, and is now facing new forms of competition from this material. Again this competition is meeting an active response from the industry and the forest owners, but a lot is still undecided about the end of this game.
Pulp and paper is another story of creation of a new forest resource base and a new industry oriented essentially towards exports. Like in the case of cork, the quality of the product has been generally good, but here also new threats are arising. The resource base of the industry is under increasing risk of fo
rest fires and the fundamentals of the Portuguese economy, in recent years, are not favour
ing exporting business.
The wood based panel industry is another case where the forest resources built up by
private forestry during the last one hundred years were able to trigger and sustain
industrial conglomerates of large international scope. Nowadays the leading group in
the world in this industry is Portuguese. The tree species at the base of this industry is maritime pine. This is the species which has been suffering most with forest fires and this is not good news for the industry. However, entrepreneurs here have been able to evolve towards other products and other markets.
The rest of the forest industries (sawmilling, carpentry and furniture) are essentially made of small, even very small enterprises relying almost entirely on the domestic market. Rising real incomes and lower real interest rates, until the turn of the century helped these activities. These favourable conditions stopped to hold at the same time as the exposure to foreign competition became more intense. The strong dependence of these industries on the macroeconomic situation of the country is now pushing them
towards improvements in labour productivity, at lower levels of employment.
... Briefly, what we can say about the current state of primary functions of the existing forest owners' organizations is that those functions tend to develop in areas where there is some kind of strategic complementarity between the services provided by the organizations and the capabilities of their members (Mendes, 1998Mendes, , 2001): a) forest owners, specially in the middle ranges of forest holding sizes, have some demand and willingness to pay for technical assistance to apply for public incentives to forestry and for services reducing the risk of forest fires, but left on their own, it would be very difficult for them to go forward in these directions; b) forest owners' organizations have a staff capable to respond to those demands and which can be sustained by the fees paid by the members they assist combined with the public financial support organisation can get. ...
In a country where 93.4% of the forest land is privately owned and often fragmented in small scale holdings, one of the major recent structural changes has been the emergence of forest owners' organizations during the 90's. For the most part, their start up was not directly supported by a specific forest policy, even though it was related to changes in this policy and benefited from public incentives.
... Drawing on our own research (Mendes, 1998(Mendes, , 2001) on non profit organisations which jointly provide a public good and private services to their members, like Olson's "selective incentives", we can make the following recommendations about the conditions that should be met by the organisations targeted for public support (technical and/or financial assistance) in the provision of rural public goods: ...
... In taking these time allocation decisions members and directors are strategically interdependent in the following sense: -the benefits of the time devoted to forest management by the owners depend on the services they get from the association whose level is decided by the board of directors; -depending on the regime of membership contributions, the level of services set by the directors might also have to take into account the owners' forest management decisions." (Mendes, 1998). ...
This paper is a follow up on a earlier one (Mendes, 1998) where I proposed a series of models for forest owners associations represented as organisation made up of two groups of strategically interacting players: the forest owners who are members of the association and the board of directors they have elected. The directors decide on the amount of services provided by the association which can be public goods (collective representation of the members, promotion of their common interests, diffusion of general information about forest programmes and best forest management practices, etc.) and private goods and services (silvicultural works preventive of forest fires, technical advice, etc.). The models were set up as games in strategic form with complete information and no payoff uncertainty. Here I pick up the second of, what is called in that previous paper, the "Portuguese" models and extend it in the following directions: - there is payoff risk for the forest owners due to exogenous hazards (forest fires or others); - forest owners can buy private services from the owners which contribute to reduce the losses resulting from those hazards. The main focus in this paper is to derive the comparative static results about the demand of these private services by the forest owners.
The forest group is a new policy instrument in Flanders (northern Belgium) to realise multifunctional forest management. This
group was introduced in 1995 and organises the various kinds of forest owners, private as well as public, on a local basis
(mean working area 751 km2), with voluntary participation (as in all forest owner organisations). This study evaluates forest groups in Flanders through
an analysis of their relevance, effectiveness, utility and implementation. The targets of forest groups are relevant to the
evolving needs and priorities at the local, regional, national and international level. The effectiveness analysis reveals
that most indicators — including the quantity of timber harvest, the number of members, the forest area with an accepted management
plan, the area under management and the area with small-scale ecological measures — have been improving between 1995 and 2004.
The utility analysis emphasises that the owners are motivated because the forest group provides information and increases
knowledge, includes the owner into a collective management plan, offers a platform for sharing management experiences and
acts as a union force against the government. However, the forest group is not the solution to introduce multifunctional forest
management by all forest owners. The implementation analysis identifies a number of impeding factors, including the imbalance
between rights and duties, inconsistencies between various policy aims, and failure of forest groups to act as a common forum
for all stakeholders in their working area.
The object of this book is to present a complete, systematic and thorough exposition of the neoclassical theory of production and distribution. Despite this basic objective, each chapter presents extensions of neoclassical theory and interpretations of established relations. The book has two distinct parts. In Part I the microeconomic theories of production, cost and derived input demand are explored in depth for both fixed-proportions and variable-proportions production functions. Special emphasis is placed upon the characteristics and implications of production functions homogeneous of degree one. Part II is devoted chiefly to the neoclassical theory of aggregate relative factor shares, the elasticity of substitution, and technological progress.
A Floresta nas Explorações Agrícolas
- Instituto Nacional De Estatística
Instituto Nacional de Estatística. 1997b. A Floresta nas Explorações Agrícolas 1995. Lisboa:
Instituto Nacional de Estatística.