Old-Growth Forest and Jobs

An optimal control model is constructed where the cutting of old-growth forest generates jobs and adds to the stock of land devoted to "newgrowth," rotational forestry. Welfare is determined by the number of jobs in the forest economy and the stock of old-growth forest, which provides "nontimber" benefits. Starting from a large inventory, the economy needs to determine when it is optimal to stop cutting old-growth forest and preserve what's left. When the economy stops cutting old growth it reaches a steady state where the number of jobs is based on the harvest of timber from new-growth forest. An inventory rule is derived for a general model. For plausable functional forms this rule implies and explicit solution for the optimal inventory of old-growth forest. The specific model is estimated for the Douglas fir region of western Washington and Oregon, where perhaps 17.5 percent of the pre-logging stock of old-growth remains. Estimates of the marginal social value for the remaining stock of old growth range from $2,089 to $7,173 per hectare, depending on the rate of discount. These values should be interpreted as "hurdle values." If a direct valuation method, such as contingent valuation, reveals that the "true" marginal social value is likely to exceed these values, then all remaining old-growth outside the National Parks should be preserved.

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Working or Discussion Paper
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WP 96-08

 Record created 2017-04-01, last modified 2018-01-22

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