Journal of Forest Economics > Vol 37 > Issue

Designing Voluntary Subsidies for Forest Owners under Imperfect Information

Frank Jensen, Department of Food and Resource Economics, University of Copenhagen, Denmark, fje@ifro.ku.dk , Bo Jellesmark Thorsen, Department of Food and Resource Economics, University of Copenhagen, Denmark, Jens Abildtrup, AgroParisTech, Université de Lorraine, France, Jette Bredahl Jacobsen, Department of Food and Resource Economics, University of Copenhagen, Denmark, Anne Stenger, AgroParisTech, Université de Lorraine, France
 
Suggested Citation
Frank Jensen, Bo Jellesmark Thorsen, Jens Abildtrup, Jette Bredahl Jacobsen and Anne Stenger (2022), "Designing Voluntary Subsidies for Forest Owners under Imperfect Information", Journal of Forest Economics: Vol. 37: No. . http://dx.doi.org/10.1561/112.00000541

Forthcoming: 30 Apr 2022
© 2021 Frank Jensen, Bo Jellesmark Thorsen, Jens Abildtrup, Jette Bredahl Jacobsen and Anne Stenger
 
Subjects
 
Keywords
ForestryVoluntary subsidiesPrivate and social amenity valueImperfect information
 

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In this article:
1. Introduction 
2. A Model with Private Amenity Values 
3. Incorrect Beliefs about the Private Amenity Value 
4. Conclusion and Discussion 
References 

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.

DOI:10.1561/112.00000541