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Timber Supply and Life Cycle Harvest of Nonindustrial Private Forest Owners: An Empirical Analysis of the Finnish Case

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The timber supply and life cycle harvest of nonindustrial private forest owners is studied. Given a perfect capital market, optimal harvesting decisions depend on timber prices, the interest rate, and the merchantable timber stock. Under effective credit rationing, timber supply and the life cycle harvest become dependent on forest owners' preferences, i.e., timber supply and consumption decisions must be made simultaneously. Thus, the effect of the price of timber on short-term supply becomes ambiguous, and the interest rate only has a negative income effect. Further, because the harvest and consumption are decided simultaneously, supply is also affected by owner characteristics. The optimal life cycle harvest rate need not be constant, and the age of the owner is a relevant explanatory variable. The timber supply function is estimated using Finnish micro data from 1982 to 1985, and the Tobit model. The hypothesis of an imperfect capital market cannot be rejected as the owner characteristics, including the owner's age, have highly significant coefficients, although the estimated coefficient of the interest rate is positive. The positive effect of the interest rate may be due to the fact that the loans of the credit-rationed forest owners in the sample are relatively small, and the positive effect of the nonrationed forest owners dominates. However, the effects of other capital (or, e.g., amenities) market imperfections cannot be ruled out. For. Sci. 37(4):1011-1029.
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Keywords: Credit rationing; Tobit model

Document Type: Journal Article

Affiliations: Finnish Forest Research Institute, Department of Forest Economics, P.O. Box 37, 00381 Helsinki, Finland

Publication date: 1991-09-01

More about this publication?
  • 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
    Other SAF Publications
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