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© 1984 Oxford University Press and the Foundation for the European Review of Agricultural Economics

research-article

Endowments and timber supply

KARL GUSTAF LÖFGREN*

Department of Forest Economics, College of Forestry Umeå, Sweden

Received March 1, 1984;

Summary

This paper contains an investigation of how changes in the size and composition of the initial endowments of forest land affect timber supply and the present value function. The model which is used consists of a linear/non-linear net revenue function, which is maximised subject to linear restrictions. The time horizon is finite.

It is shown under what conditions the classical decomposition of the economic management problem into a problem at the stand level is correct, and how the cutting policy is changed when these conditions are no longer fulfilled. Moreover, it is shown how the shadow prices of land (the value of the marginal unit of land) depend on prices, the growth function, marginal cutting costs, and the initial endowment. Finally, it is discussed how certain non-linearities - in combination with regulations of the trade in forest land - are likely to result in a socially inefficient cutting programme.

The theoretical results have some bearing on the econometric specification of a (long-run) timber supply function.


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