Forest Management and Landowners’ Discount Rates in the Southern United States

Abstract

In theory, decisions with long-term pay-offs, such as whether to invest in forest management, are influenced by time preferences. However, this relationship is difficult to test empirically and time preferences are often assumed constant across individuals. We examine the relationship between forest management behavior and personal discount rates by modeling forest management choices as a function of individual discount rates elicited through binary choice questions. We focus on “limited resource woodland owners” in the Southern United States, including landowners who are traditionally underserved by public institutions (i.e., minorities and women) and who face financial, social and natural resource constraints that limit their forest management options. We found that the probability of harvesting timber is positively related with personal discount rates, as predicted by theory. However, discount rates are not significantly related to stand improvements or contact with a professional forester, suggesting that lack of investment in forest management is not a result of landowner impatience. Rather, these behaviors are driven by characteristics such as size of property, proximity of residence to woodlands, and tenureship characteristics including whether the woodlands are inherited.