The Effect of Stochastic Oscillations in Property Rights Regimes on Forest Output in China

Stephen Salant and Xueying Yu

RFF Working Paper Series from Resources for the Future

Abstract: Over the past 65 years, forest tenure in China has oscillated unpredictably between private and common property regimes. This policy-induced uncertainty has distorted the harvesting decisions of individuals granted rights to grow trees and has lowered the value of China’s forest output. We provide an analytical framework for assessing these effects quantitatively. Understanding the consequences of this policy-induced uncertainty is particularly important since China is currently engaged in an ambitious plan to increase its domestic supply of timber. We estimate that net revenue from nonstate forests would approximately double if farmers had entirely secure use rights to grow trees. Contrary to the standard result in the literature that catastrophic risk makes farmers harvest earlier, we find that they may delay harvesting if the government pays sufficient compensation for the loss.

Keywords: forest tenure risk; Faustmann model; optimal rotation period under uncertainty (search for similar items in EconPapers)
JEL-codes: Q23 Q28 (search for similar items in EconPapers)
Date: 2014-02-13
New Economics Papers: this item is included in nep-agr, nep-env and nep-tra
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Related works:
Working Paper: The Effect of Stochastic Oscillations in Property Rights Regimes on Forest Output in China (2013)
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