Forest management in an urbanizing landscape

This paper aims at building a theoretical framework to examine the impact of development pressure on private owner’s forest management practices, namely, on regeneration and conversion cut dates. As the rent for developed land is rising over time, our model creates the possibility of switching from forestry to residential use at some point in the future, thus departing from the Faustmann’s traditional setup. Comparative statics results with respect to stumpage prices, regeneration costs and urban growth parameters are provided. The results obtained depend on the impact on the opportunity cost of holding the stand and the impact on the opportunity cost of holding the land, generalizing Faustmann’s unambiguous results.

UECE (Research Unit on Complexity and Economics) is financially supported by FCT (Fundação para a Ciência e a Tecnologia), Portugal. This paper is part of the Strategic Project PEst-OE/EGE/UI0436/2011 and also benefited from financial support under the project PTDC/EGE-ECO/113403/2009. University of California MRPI Project: Virtual Co-laboratory for Policy Analysis in Greater L.A.