Impacts of declining discount rates on optimal harvest age and land expectation values

Richard J. Brazee

doi:10.1016/j.jfe.2017.06.002

Impacts of declining discount rates on optimal harvest age and land expectation values

Research output: Contribution to journal › Article › peer-review

Abstract

Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.

Original language	English (US)
Pages (from-to)	27-38
Number of pages	12
Journal	Journal of Forest Economics
Volume	31
DOIs	https://doi.org/10.1016/j.jfe.2017.06.002
State	Published - Apr 2018

Keywords

Declining discount rate
Faustmann Model
Land expectation value
Multiple harvest ages
Non-optimal neighborhoods

ASJC Scopus subject areas

Forestry
Geography, Planning and Development
Ecology

Online availability

10.1016/j.jfe.2017.06.002

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abstract = "Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.",

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author = "Brazee, {Richard J.}",

note = "Funding Information: U.S. Department of Agricultural Mcintire-Stennis funding through ILLU-875-344 and ILLU875-957 is gratefully acknowledged. Both Colin Price and an anonymous JFE reviewer dramatically improved the quality of the manuscript. Publisher Copyright: {\textcopyright} 2017 Department of Forest Economics, Swedish University of Agricultural Sciences, Ume{\aa}",

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N2 - Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.

AB - Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.

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KW - Land expectation value

KW - Multiple harvest ages

KW - Non-optimal neighborhoods

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JF - Journal of Forest Economics

ER -

Impacts of declining discount rates on optimal harvest age and land expectation values

Abstract

Keywords

ASJC Scopus subject areas

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