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Forest Taxation and Timber Supply under Price Uncertainty: Credit Rationing in Capital Markets

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This paper provides a detailed analysis of timber harvest decisions under price uncertainty and credit rationing. Under these circumstances the Fisherian separation theorem no longer holds. Instead, the harvesting decisions of forest owners depend on their consumption preferences. The implications of this nonseparability between consumption and harvesting decisions under credit rationing are developed for various individual forest taxes as well as for various changes in the structure of forest taxes, which will keep the government's tax revenues constant. The importance of credit rationing lies in the fact that the distribution of revenues between the current and future period affects harvesting decisions. Hence, the taxes and tax policies that affect this revenue distribution bring about liquidity effects, which may make the effects of taxes sharply different from those found in the presence of perfect capital markets. For. Sci. 35(1):160-172.
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Keywords: "imperfections."; Timber supply; capital market; forest taxes

Document Type: Journal Article

Affiliations: Department of Economics, University of Helsinki, Aleksanterinkatu 7, 00100 Helsinki, Finland

Publication date: 1989-03-01

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    Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
    Forest Science is published bimonthly in February, April, June, August, October, and December.

    2016 Impact Factor: 1.782 (Rank 17/64 in forestry)

    Average time from submission to first decision: 62.5 days*
    June 1, 2016 to Feb. 28, 2017

    Also published by SAF:
    Journal of Forestry
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