Government Preferences and Public Forest Harvesting: A Second‐Best Approach

Abstract

AbstractAround the world governments own forest capital stocks and can harvest them for revenue or provide public goods from preserving them. This article examines how government preferences for revenue generation and public goods provision affect policy choices. Many instances are found where governments might exploit public forests at the expense of public goods. This is most likely when budget pressures are severe, or when the government prefers revenue generation to nontimber benefits provision. In particular, budget‐constrained governments are more likely to exploit public harvests to raise revenues and subsidize the forest sector, especially when revenues are increasing in public harvesting. Public harvesting should also influence tax choice. The results shed light on current forest policy debates and can be used to predict behavior of developed and developing country governments facing external pressures.