Three essays on the economics of forest investments
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The four essays of this dissertation are combined under the general umbrella of investments in forest resources. The first essay derives a theoretic relationship between timber price expectation and forest investment. The total price effect on investments includes the direct expected revenue change as well as the indirect change in marginal yield due to possible rotation adjustments. The Land Expectation Value (LEV) concept includes both direct and indirect effects and it is used to derive the price-investment relationship. An empirical example for a loblolly pine plantation in the Coastal Plain region of Southeastern U.S. documents a completely inelastic relationship between marginal timber price and forest investments. The study concludes that for a wide range of expected prices and yield responses to mid-rotation investments a marginal price expectation does not significantly influence forest investment behavior. The second essay develops a game theory strategy to improve potential forest investment efficiency at the stand level. A shock-driven price expectation may result in a timed investment at the market level. Future forest inventories and timber supplies may be impacted by aggregate investment behavior and drive market prices in the direction opposite that of prior expectation. The investment-induced supply Cobweb cycle may cause market inefficiency because it may lead to over or under-investments in forestry production. Pure and mixed Nash equilibrium solutions to investment behavior are calculated for private timberland owners in the Coastal Plain region of the Southeastern U.S. Results suggest that a game theoretic strategy and tactical market information improves the individual efficiency of forest investments. The third essay develops an econometric model to identify factors that contribute to the value of residential property in Clarke County, Georgia. Residential property represents a bundle of characteristics and amenities, and the implied value of each characteristic can be determined with an implicit valuation. The developed hedonic price model estimates the value of the environmental amenity from observed amenity characteristics and residential transaction prices. A novel technique was developed to measure tree presence on residential lots. The percent tree coverage on residential property represents a clear and an unbiased measurement of their environmental amenity. The results document that residential amenities, represented by the tree coverage, significantly contribute to the value of residential property in Clarke County, Georgia. In the fourth essay we explore the question of benefit transfer of environmental characteristics. We compare the implicit values of tree coverage from Clarke County, Georgia with those from Forsyth and Wake Counties, North Carolina. Property buyers of the two North Carolina counties valued residential property characteristics differently. Transaction data pooling for all three counties was not justified. Results indicate that although the marginal values for tree coverage were comparable in Forsyth and Wake Counties, they differ significantly from the estimates for Clarke County, Georgia. Our results suggest that the benefit transfer for tree coverage cannot be applied freely to the areas outside the original experimental site.