Land allocation between a multiple-stand forest and agriculture under storm risk and recursive preferences

Gaspard Dumollard and Stéphane De Cara

Journal of Environmental Economics and Policy, 2018, vol. 7, issue 3, 256-268

Abstract: This study aims to characterise steady-state land allocations between a multiple-stand forest and agriculture, when the forest is subject to a storm risk. The landowner is supposed to have recursive preferences, which permits to distinguish between intertemporal preferences and risk preferences. Using a stochastic dynamic programming model, we show that both land allocation and forest management depend on the risk and on both types of preferences at the steady-state. Risk aversion is shown to favour land allocation to agriculture and to reduce the forest average harvest age while the preference for a regular income is shown to favour forestry and to reduce the average harvest age.

Date: 2018
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Working Paper: Land allocation between a multiple-stand forest and agriculture under storm risk and recursive preferences (2018)
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DOI: 10.1080/21606544.2017.1409654

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