Risk Preferences, Risk Perceptions and Timber Harvest Decisions – An Empirical Study of NIPF Owners in Northern Sweden

Author

Andersson Mats and Peichen Gong

Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, 6-9, issue 42

Abstract: A mail survey of NIPF owners in two counties in northern Sweden was conducted to investigate the risk preferences, perceptions of the return and risk of timber investment relative to investment alternatives outside forestry. Our aim was to determine to what extent the NIPF owners’ harvesting behaviour was consistent with their preferences and subjective judgments. A majority of the respondents were risk-neutral or risk-prone. We found that risk preferences have significant impacts on the decision to fell; the more a forest owner likes to take risks, the more likely it is that he/she conducts final felling. The result also shows large variations among NIPF owners with respect to the subjective judgements of the return and risk of the alternative investments. For each respondent we elicited the most preferred investment alternative based on the stated risk preferences and the subjective judgements of the return and risk of the alternative investments. Owners whose preferred investment alternative is the mature forest are on average significantly less active in harvesting than owners with other preferred investment alternatives. The study reveals indications of the difficulties for NIPF owners to make rational decisions when faced with uncertainties.

Keywords: Risk-preference; Risk-perception; Subjective judgement; Felling decision; Consistency; Preferred investment; International Development; Land Economics/Use; Risk and Uncertainty (search for similar items in EconPapers)
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