Designing Voluntary Subsidies for Forest Owners under Imperfect Information

Frank Jensen (), Bo Thorsen, Jens Abildtrup, Jette Bredahl Jacobsen () and Anne Stenger ()
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Frank Jensen: IFRO - Institute of Food and Resource Economics [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet
Jette Bredahl Jacobsen: IFRO - Institute of Food and Resource Economics [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet
Anne Stenger: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: In this paper, we study voluntary subsidies offered to forest owners to increase rotation periods. We assume that a forest owner takes private amenity values into account when making decisions, but these values are lower than the social amenity values; therefore, an amenity value externality arises. Furthermore, the regulator has imperfect information regarding the timber profit of the forest owner. We show that voluntary subsidies must reflect the difference between (a) private and social amenity values and (b) timber profit among the possible types of the forest owner. In this way, we solve the amenity value externality and the problem of imperfect information about timber profit in a second-best optimal way. We have also investigated what happens if the regulator excludes private amenity values when fixing voluntary subsidies and we show that two sources of efficiency losses arise: (a) non-optimal rotation periods and (b) non-truthful revelation of private information.

Keywords: Imperfect information; Private and social amenity value; Voluntary subsidies; Forestry (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

Published in Journal of Forest Economics, 2022, 37 (1), pp.73-101. ⟨10.1561/112.00000541⟩

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Journal Article: Designing Voluntary Subsidies for Forest Owners under Imperfect Information (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03702382

DOI: 10.1561/112.00000541

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