Journal of Forest Economics > Vol 12 > Issue 4

Variation of federal cost-share programs in the United States and the inducement effects on tree planting

Changyou Sun, , csun@cfr.msstate.edu
 
Suggested Citation
Changyou Sun (2007), "Variation of federal cost-share programs in the United States and the inducement effects on tree planting", Journal of Forest Economics: Vol. 12: No. 4, pp 279-296. http://dx.doi.org/10.1016/j.jfe.2006.09.002

Published: 12 Feb 2007
© 0 2007 Changyou Sun
 
Subjects
 
Keywords
JEL Codes:C220Q230
Cost-share programsKalman filterState spaceTime-varying parameter
 

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In this article:
Introduction
Federal cost-share programs and its impact
Analytical framework, variables, and data
State space model with time-varying parameters
Results
Conclusions

Abstract

A long existing question associated with federal cost-share programs in the United States has been whether these public subsidies have induced or substituted for landowners’ private investment in tree planting. This study reexamined the relationship between public funding and private investment behavior in the past 50 years by employing a state space model with time-varying parameters. Three regions, i.e., the South, North, and West were formed and compared. The analysis revealed that the relationship has changed over time and across regions and both inducement and substitution effects have occurred. The inducement effect occurred in the South from 1960 to 1972 and in the West from 1961 to 2002 while the substitution effect was present for all other years in the South and West. In the North, there has been a strong substitution effect from 1951 to 2002.

DOI:10.1016/j.jfe.2006.09.002