A long-run perspective on renewable resource use and amenity benefits: the case of forestry

Abstract

We examine the existence and stability properties of the long-run equilibrium in an economy using forest resources for consumption and amenity benefits. We incorporate forest resources into an overlapping generations model as a factor of production, source of amenity benefits and store of value. We characterise dynamics and stability of steady-state equilibria with a logistic resource growth function, and demonstrate with parametric and numerical examples that a unique and stable equilibrium exists under a set of parameter restrictions. We show that the productivity of timber in production of consumption and the weight given to amenities substantially affect the steady-state equilibrium stock and its stability and dynamics. Especially, the higher the productivity of timber in production, the lower the steady-state forest stock.

Keywords:

• overlapping generations
• forest amenities
• fundamentals of the economy

JEL codes:

• D90
• Q20
• C62

Acknowledgements

We thank two anonymous referees for useful comments. Puhakka thanks the Yrjö Jahnsson and OKO bank foundations for support and the Department of Economics at the University of Pennsylvania for hospitality.