A Ricardian Model of Forestry

Abstract

T his paper provides a continuous-tim e "R icardian" m odel of forestry, w here, in response to an increase in tim ber dem an d, forest cultivation is progressively intensified on the m ost fertile lands and/or extended to less fertile qualities of lands. It is show n that, at a given level of the rate of interest, a set of "break-through tim ber prices" gives the order of fertility (i.e., the order in w hich the different qualities of land are taken into cultivation) and that, for each land, prices of standing trees are positive above a "threshold tim ber price". Since, for each land, the break -through price is higher than the threshold price, R icardo is show n to be right: a higher dem and for tim ber could sim ply raise those com ponents of the landlord com pensation w hich are not rent.