Designing voluntary subsidies for forest owners under imperfect information
Research output: Contribution to journal › Journal article › Research › peer-review
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.
|Journal||Journal of Forest Economics|
|Number of pages||29|
|Publication status||Published - Feb 2022|
© 2022 F. Jensen, B. J. Thorsen, J. Abildtrup, J. B. Jacobsen and A. Stenger.