Forest Conservation in Costa Rica when Nonuse Benefits are Uncertain but Rising

Bulte, Erwin; Soest, Daan van; Kooten, G. Cornelis van; Schipper, R.A.

doi:10.1111/1467-8276.00249

Cited by 61 publications

(78 citation statements)

References 15 publications

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“…In our model, for instance, land development is incremental as in Bulte et al (2002). In addition, the conclusions regarding the role played by taxation on the investor initiative are in line with the literature on FDI.…”

Section: The Modelsupporting

confidence: 82%

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Farmland Investments in Africa: What's the Deal?

Corato

Heß

2014

SSRN Journal

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Large-scale foreign investments in African farmland are rising and may contribute to agricultural productivity growth and economic development. However, host countries sometimes have to wait longer for the economic bene…ts to arrive than initially expected. In this respect, the timing of project development is crucial and depends on the economic incentives provided to the investors. We therefore present a dynamic stochastic programming model that re ‡ects the typical bargaining situation concerning large land deals in Africa and allows the e¤ect of market-and country-speci…c risks and taxation to be assessed. The model shows that commodity price volatility increases the value of the land development option, but slows down the land development process. Furthermore, it shows that host country attempts to negotiate …xed commitments to the speed of project development may run counter to the structure of economic incentives at the project site. The applicability of the model is demonstrated for a recent 10,000-hectare cotton project in Ethiopia. Response surface estimations suggest that Ethiopia has negotiated a contract under which it will receive about half the expected total project value, as long as it levies the regular corporate tax rate. keywords: foreign direct investment, land leasing, real options, nash bargaining. jel classification: C61, D81, F23, Q24.We wish to thank the participants at the 2013 AAEA & CAES Joint Annual Meeting for useful comments and suggestions. The usual disclaimer applies.y Corresponding address:

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Section: The Modelsupporting

confidence: 82%

“…In Bulte et al (2002), a social planner must determine if and when forestland should be developed. The optimal conversion plan must be set taking into account the trade-o¤ between potential pro…ts accruing from agriculture and the uncertain bene…ts, in terms of environmental goods and services, provided by the forest if conserved.…”

Section: The Modelmentioning

confidence: 99%

Farmland Investments in Africa: What's the Deal?

Corato

Heß

2014

SSRN Journal

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“…5 Two contributions close to ours are Bulte et al (2002) and Leroux et al (2009). In the …rst paper, the authors determine the socially optimal forest stock to be held by trading o¤ pro…t from agriculture and the value of ES attached to forest conservation.…”

Section: Introductionmentioning

confidence: 99%

“…If binding, on the contrary, further conversion is pro…table and then landholders, fearing a restriction in the exercise of the option to convert, may start a conversion run 6 which rapidly exhausts the forest stock up to the …xed limit. 7 Comparing …rst-best and second-best conversion policy we identify the combination of policy parameters leading to a …rst-best conversion policy.…”

Section: Introductionmentioning

confidence: 99%

Land conversion pace under uncertainty and irreversibility: too fast or too slow?

2013

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In this paper stochastic dynamic programming is used to investigate land conversion decisions taken by a multitude of landholders under uncertainty about the value of environmental services and irreversible development. We study land conversion under competition on the market for agricultural products when voluntary and mandatory measures are combined by the Government to induce adequate participation in a conservation plan. We study the impact of uncertainty on the optimal conversion policy and discuss conversion dynamics under di¤erent policy scenarios on the basis of the relative long-run expected rate of deforestation. Interestingly, we show that uncertainty, even if it induces conversion postponement in the short-run, increases the average rate of deforestation and reduces expected time for total conversion in the long run. Finally, we illustrate our …ndings through some numerical simulations. keywords: optimal stopping, deforestation, payments for environmental services, natural resources management. jel classification: C61, D81, Q24, Q58.We wish to thank Guido Candela for helpful comments. We are also grateful for comments and suggestions to participants at the 12th International BIOECON conference; the 51st SIE conference; the 18th Annual EAERE Conference; the 8th workshop of the International Society of Dynamic Games; and to seminar participants at

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“…First, clearing may be an irreversible decision, second, pay-offs attached to such decision are often uncertain and, third, their weight in the decision objective depends on intergenerational time preferences. 4 There is a vast literature dealing with optimal conservation policy and forest management under uncertainty and irreversibility. 5 An unifying aspect in this literature is the so called real option approach.…”

Section: Introductionmentioning

confidence: 99%

Optimal conservation policy under imperfect intergenerational altruism

Corato¹

2012

JFE

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SummaryIn this paper we study the optimal forest conservation policy by a hyperbolically discounting society. Society comprises a series of non-overlapping imperfectly altruistic generations each represented by its own government. Under uncertainty about future pay-offs we determine, as solution of an intergenerational dynamic game, the optimal timing of irreversible harvest. Earlier harvest occurs and the option value attached to the forest clearing decision is eroded under both the assumptions of naïve and sophisticated belief about future time-preferences. This results in a bias toward the current generation gratification which affects the intergenerational allocation of benefits and costs from harvesting and conserving a natural forest. Keywords AbstractIn this paper we study the optimal forest conservation policy by a hyperbolically discounting society. Society comprises a series of non-overlapping imperfectly altruistic generations each represented by its own government. Under uncertainty about future pay-offs we determine, as solution of an intergenerational dynamic game, the optimal timing of irreversible harvest. Earlier harvest occurs and the option value attached to the forest clearing decision is eroded under both the assumptions of naïve and sophisticated belief about future time-preferences. This results in a bias toward the current generation gratification which affects the intergenerational allocation of benefits and costs from harvesting and conserving a natural forest.

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Forest Conservation in Costa Rica when Nonuse Benefits are Uncertain but Rising

Cited by 61 publications

References 15 publications

Farmland Investments in Africa: What's the Deal?

Farmland Investments in Africa: What's the Deal?

Land conversion pace under uncertainty and irreversibility: too fast or too slow?

Optimal conservation policy under imperfect intergenerational altruism

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