Spatio-Temporal Modeling of Lightning Fires on Forestland: A Compensation Scheme

Xuan Chen and Barry Goodwin ()

No 151285, 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. from Agricultural and Applied Economics Association

Abstract: In the US forestry industry, wildfire has always been one of the leading causes of damage. This topic is of growing interest as wildfire has caused huge losses in recent years. Among all causes, lightning has always been the leading hazard. Unlike human related wildfires for which timber owners may be able to trace the responsible persons to claim losses, forestland owners essentially have no means to recover their losses against lightning-induced wildfire. In light of the fact that there are very few risk management instruments available to compensate timber losses. Following this line of inquiry, our paper studies risks of lightning induced wildfire, conditioning on crucial informational variables, across both spatial units and time periods. A non-parametric bootstrapping method is used to quantify the risks. Some relevant observable variables, such as environment and climate factors, are found to be statistically significant factors related to wildfire risks. A group index insurance scheme has been proposed and its associated actuarially fair premium rates have been estimated. Implications for wildfire management policies are also discussed.

Keywords: Land Economics/Use; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 22
Date: 2013
New Economics Papers: this item is included in nep-ias and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea13:151285

DOI: 10.22004/ag.econ.151285

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