Journal of Forest Economics > Vol 31 > Issue 1

Impacts of declining discount rates on optimal harvest age and land expectation values

Richard J. Brazee, , brazee@illinois.edu
 
Suggested Citation
Richard J. Brazee (2018), "Impacts of declining discount rates on optimal harvest age and land expectation values", Journal of Forest Economics: Vol. 31: No. 1, pp 27-38. http://dx.doi.org/10.1016/j.jfe.2017.06.002

Published: 0/4/2018
© 0 2018 Richard J. Brazee
 
Subjects
 
Keywords
Declining discount rateFaustmann ModelLand expectation valueMultiple harvest agesNon-optimal neighborhoods
 

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In this article:
1 Introduction
2 Background and notation
3 Characterizing optimal harvest ages and land expectation values
4 Comparative statics results
5 Multiple optimal harvest ages
6 Non-optimal neighborhoods

Abstract

Several national governments now require the discount rate for public projects with long planning horizons to decrease over the life of a project. Theoretical results that characterize the impacts of a declining discount rate on optimal harvest age and land expectation values in the Faustmann Model are presented. New results include: derivation of conditions for a sequences of optimal harvest ages and land expectation values, comparative statics results, conditions that must be satisfied for multiple optima, and proof that harvesting is never optimal immediately before a discrete decrease in the discount rate.

DOI:10.1016/j.jfe.2017.06.002