Endogenous time preferences of forest goods and community-based forest management

Pradeep Kumar and Shashi Kant

Ecological Economics, 2019, vol. 163, issue C, 205-214

Abstract: In the economic analysis of CBFM, people's discount rates are assumed exogenous and same for all goods. We examined the validity of this assumption by eliciting the discount rates of households for grass, timber, fuelwood and money, and analyzed the impacts of various personal and economic factors on households' discount rates. We found that time preferences are endogenous and good-specific. A good proportion of households have infinite discount rates for forest goods. The mean values of monthly discount rates, for households that indicated finite discount rates, are 0.67 for timber, 6.83 for fuelwood, 55.49 for grass, and 3.47 for money. The availability of alternative sources and current consumption of the forest goods are two main determinants of a household's discount rates. The study provides many useful insights for the design and implementation of CBFM programs: the concept of “mental accounting” should be used for economic analyses of CBFM programs, different management strategies should be adopted for different forest goods, and alternative sources should be provided to meet the current needs of the households.

Keywords: Community-based forest management; Discount rate; Endogenous time preference; Forest goods; Good-specific time preference; Hyperbolic discount rate (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:163:y:2019:i:c:p:205-214

DOI: 10.1016/j.ecolecon.2019.03.016

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