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Economic evaluation of biotechnological progress: The effect of changing management behavior
Department of Forest Economics, Swedish University of Agricultural Sciences.
Umeå University, Faculty of Social Sciences, Department of Economics.
The Forestry Research Institute of Sweden Box 3, SE-918 21 Sävar, Sweden.
2013 (English)In: Natural Resource Modeling, ISSN 0890-8575, Vol. 26, no 1, 26-52 p.Article in journal (Refereed) Published
Abstract [en]

The paper assesses the welfare effects of biotechnological progress, as exemplified by tree improvements, using a partial equilibrium model. Timber demand is assumed to be stochastic and the distributions of its coefficients known. The coefficients of a log-linear supply function are determined by maximizing the expected present value of the total surplus of timber production, both in the presence and in the absence of genetically improved regeneration materials. The supply functions are then used to estimate the expected present values of the total surplus in different cases through simulation. These estimates enable us to assess the direct effect and the effect of changing harvest behavior on the expected present value of the total surplus. The main results of the study are (i) the presence of genetically improved regeneration materials has significant impacts on the aggregate timber supply function; (ii) the application of genetically improved regeneration materials leads to a significant increase in the expected present value of the total surplus; and (iii) a considerable proportion of the welfare gain results from the change in harvest behavior. A conclusion we draw from this study is that ignoring the influences of technological and policy changes on behavior can lead to significantly biased welfare estimates. We view the model as a potential approach to conducting counterfactual policy comparisons in economics without forward-looking data.

Place, publisher, year, edition, pages
2013. Vol. 26, no 1, 26-52 p.
Keyword [en]
Timber market model, tree improvements, optimal harvest decision, timber supply
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Research subject
URN: urn:nbn:se:umu:diva-38167DOI: 10.1111/j.1939-7445.2012.00118.xISI: 000314775900002OAI: diva2:372694

Article first published online: 4 APR 2012

Available from: 2010-11-26 Created: 2010-11-26 Last updated: 2013-06-03Bibliographically approved

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Löfgren, Karl-Gustaf
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