Journal of Forest Economics > Vol 37 > Issue 3

Tree Planting Subsidies and Land Use Switching between Forestry and Agriculture in the US South

Bin Mei, Warnell School of Forestry and Natural Resources, University of Georgia, USA, bmei@uga.edu , David N. Wear, Resources for the Future, Washington DC, USA, wear@rff.org , Yanshu Li, Warnell School of Forestry and Natural Resources, University of Georgia, USA, Yanshu.Li@uga.edu
 
Suggested Citation
Bin Mei, David N. Wear and Yanshu Li (2022), "Tree Planting Subsidies and Land Use Switching between Forestry and Agriculture in the US South", Journal of Forest Economics: Vol. 37: No. 3, pp 237-257. http://dx.doi.org/10.1561/112.00000546

Publication Date: 25 Jul 2022
© 2022 B. Mei, D. N. Wear and Y. Li
 
Subjects
 
Keywords
JEL Codes: D81, Q15
Decision marking under uncertaintyfarmland and timberland investmentland economicsrural policystochastic process
 

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In this article:
1. Introduction 
2. Methods 
3. Data 
4. Results 
5. Discussion and Conclusions 
References 

Abstract

A regime switching model based on real options shows that optimal land use switching boundaries are contingent upon the stochastic behavior (trend and volatility) of timberland and cropland returns, conversion costs, and return correlation. Using this modeling framework applied to timberland and cropland in the US South, tree planting subsidies are shown to increase forest area over baseline projections. However, timber supply feedbacks and partial eligibility for subsidies are shown to generate substantial benefit leakage. Given the context of market feedbacks it's not clear that tree planting subsidies alone are an effective policy instrument for expanding forest area.

DOI:10.1561/112.00000546