The Effect of Stumpage Rates on Timber Recovery

Harry Paarsch

Canadian Journal of Economics, 1993, vol. 26, issue 1, 107-20

Abstract: Governments often sell the right to harvest timber on public land. If timber is of heterogeneous quality and timber pri ces reflect this heterogeneity, then charging a fixed stumpage rate per cubic meter of timber harvested independent of timber quality can induce the economically inefficient practice of harvesting only the best grades of timber, "high-grading." Charging a lump sum that is independent of the volume of timber harvested yields the efficient choice of minimum timber quality. With competitive bidding, the lump-sum scheme extracts all of the resource rent while the stumpage rate scheme leaves some rent in the forest.

Date: 1993
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