Cost sharing for timber stand improvements: Inducement or crowding out of private investment?

Author

Ville Ovaskainen, Teppo Hujala, Harri Hänninen and Jarmo Mikkola

Forest Policy and Economics, 2017, vol. 74, issue C, pages 40-48

Abstract: Cost sharing has been widely used to encourage the management of privately owned forests. While there is evidence of its capacity to promote management activities, it still remains open whether cost sharing induces additional private investments or whether it substitutes public funds for private capital. This study re-examines the latter issue in the case of Finnish family forest owners' pre-commercial and restoration thinnings using data from a nation-wide survey (n=3801). A two-step model of cost-share participation and stand improvements is used to account for the endogeneity of cost-share participation. Cost-share participation was related to personal assistance and clearly encouraged forest owners' engagement in and extent of stand improvements. The inducement or crowding out of private capital is analytically shown to depend on the relative magnitude of forest owners' response to cost-share incentives in each specific situation. In the present case evidence suggests that cost sharing has had an inducement effect on private investment. This is likely related to the advanced personal assistance that has promoted the knowledge of and participation in cost sharing. The findings suggest that cost sharing can be a useful component in a balanced policy mix especially when combined with informational instruments.

Keywords: Cost sharing; Family forests; Policy instruments; Probit model; Tobit model; Two-step estimation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1389934116303884
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:forpol:v:74:y:2017:i:c:p:40-48

Access Statistics for this article

Forest Policy and Economics is currently edited by M. Krott

More articles in Forest Policy and Economics from  Elsevier
Series data maintained by Dana Niculescu (repec@elsevier.com).

For further details log on website :
http://econpapers.repec.org/article/eeeforpol/v_3a74_3ay_3a2017_3ai_3ac_3ap_3a40-48.htm