Hedging Strategies in Forest Management

24 Pages Posted: 9 Oct 2007 Last revised: 6 May 2011

See all articles by Brunette Marielle

Brunette Marielle

LEF-ENGREF-INRA

Stéphane Couture

LEF-ENGREF-INRA

Eric Langlais

EconomiX, CNRS & University of Paris Ouest

Date Written: September 29, 2007

Abstract

The paper focuses on forests management strategies for natural hazards of nonindustrial owners, in the case where the forest provides nontimber services. We introduce a basic two-period model where the private owner manages natural hazards on his forest thanks to the accumulation of savings on his individual income, 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 practices may be seen as perfectly substitutable tools for the management of natural hazards. However, our analysis predicts that the harvesting rule displays a specific sensibility to price effects and/or changes in the distribution of natural hazards, depending on whether forest owners opt for the financial strategy or undertake sylvicultural practices.

Keywords: Risk, Forest, Amenities, Savings and Sylvicultural Practices

JEL Classification: D81, Q23, Q54

Suggested Citation

Marielle, Brunette and Couture, Stéphane and Langlais, Eric, Hedging Strategies in Forest Management (September 29, 2007). Available at SSRN: https://ssrn.com/abstract=1020245 or http://dx.doi.org/10.2139/ssrn.1020245

Brunette Marielle (Contact Author)

LEF-ENGREF-INRA ( email )

14 rue Girardet
Nancy, 54042
France

Stéphane Couture

LEF-ENGREF-INRA ( email )

14 rue Girardet
Nancy, 54042
France

Eric Langlais

EconomiX, CNRS & University of Paris Ouest ( email )

200 Avenue de la République
Nanterre, 92200
France

HOME PAGE: http://economix.u-paris10.fr/fr/membres/?id=889

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