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Inter-temporal Microsimulation Model: Forestry Planting Decisions

  • Cathal O’DonoghueEmail author
Chapter

Abstract

There are important policy incentives in Ireland to promote land use change for farmers to plant forests on their land. This has been the objective of both developing income diversification opportunities, the development of a forestry value chain and for greenhouse gas mitigation through the development of a carbon sink. Again as in the case of agri-environment schemes, participation in afforestation schemes is motivated by a number of factors. Participation is driven both by the relative financial incentives of forestry relative to the existing land use type and general preferences about farming versus another land use or lifestyle. We would not expect farmers to be profit maximisers in this context. As forests take nearly 40 years to mature, there is a time lag between investment and returns, as a result planting decisions are a life-cycle choice, rather than a current period choice, such as stocking rate or participation in an agri-environment scheme. Forest planting can influence land values as afforested land has a lower value as it is less flexible (once planted, it must remain planted). It also has an impact on labour as it requires less labour than other agricultural land uses. Incomes are influenced by differences in market returns and subsidies associated with the land use choice. In this chapter, we simulate counterfactual attributes for choices not made, where the choices are a share of land planted with forestry. However, unlike the previous chapter, we utilise a lifetime period of analysis. In other words, the analytical frame is more akin to other life-cycle choices like retirement or education, than contemporaneous choices such as labour supply. We describe the behavioural drivers of a land use choice comparing actual and counterfactual values by income source, land value and labour for different land use choices. We find that there are a substantial number of farmers who would be financially better off to plant forests, but who have not done so.

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Copyright information

© The Author(s) 2017

Authors and Affiliations

  1. 1.Rural Economy and Development ProgrammeAthenryIreland

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