Consistent estimation of long-run nonindustrial private forest owner timber supply using micro data

Abstract

In this paper, the effects of stumpage prices and forest and landowner characteristics on nonindustrial private forest owners’ long-run timber supply are examined using cross-sectional variation in a data set of 1860 landowners in Finland during 1994–1998. We estimate an inverse hyperbolic sine Tobit model allowing for heteroscedasticity and non-normality of errors. The hypotheses of the rotation model can be examined by decomposing the effects of the exogenous variables into the effects on the conditional mean of nonzero harvests and the effects on the probability of nonzero harvest. The results of the study are consistent with the Faustmann rotation model when the forest owner simultaneously decides both the optimal rotation age of an even-aged stand and the optimal life-cycle consumption of goods and services with in situ valuation of standing timber.