Land Conversion Pace under Uncertainty and Irreversibility: too fast or too slow?

Luca Di Corato (), Michele Moretto and Sergio Vergalli

No 2011.84, Working Papers from Fondazione Eni Enrico Mattei

Abstract: In this paper stochastic dynamic programming is used to investigate land conversion decisions taken by a multitude of landholders under uncertainty about the value of environmental services and irreversible development. We study land conversion under competition on the market for agricultural products when voluntary and mandatory measures are combined by the Government to induce adequate participation in a conservation plan. We study the impact of uncertainty on the optimal conversion policy and discuss conversion dynamics under different policy scenarios on the basis of the relative long-run expected rate of deforestation. Interestingly, we show that uncertainty, even if it induces conversion postponement in the short-run, increases the average rate of deforestation and reduces expected time for total conversion in the long run. Finally, we illustrate our findings through some numerical simulations.

Keywords: Optimal Stopping; Deforestation; Payments for Environmental Services; Natural Resources Management (search for similar items in EconPapers)
JEL-codes: C61 D81 Q24 Q58 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-agr and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Land conversion pace under uncertainty and irreversibility: too fast or too slow? (2013)
Working Paper: Land Conversion Pace under Uncertainty and Irreversibility: too fast or too slow? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2011.84

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