ECONOMIC EVALUATION OF BIOTECHNOLOGICAL PROGRESS: THE EFFECT OF CHANGING MANAGEMENT BEHAVIOR
Version of Record online: 4 APR 2012
Copyright © 2012 Wiley Periodicals, Inc.
Natural Resource Modeling
Volume 26, Issue 1, pages 26–52, February 2013
How to Cite
GONG, P., LÖFGREN, K.-G. and ROSVALL, O. (2013), ECONOMIC EVALUATION OF BIOTECHNOLOGICAL PROGRESS: THE EFFECT OF CHANGING MANAGEMENT BEHAVIOR. Natural Resource Modeling, 26: 26–52. doi: 10.1111/j.1939-7445.2012.00118.x
- Issue online: 5 FEB 2013
- Version of Record online: 4 APR 2012
- Accepted 14th February 2012.
- Timber market model;
- tree improvements;
- optimal harvest decision;
- timber supply
Abstract The paper assesses the welfare effects of biotechnological progress, as exemplified by tree improvements, using a partial equilibrium model. Timber demand is assumed to be stochastic and the distributions of its coefficients known. The coefficients of a log-linear supply function are determined by maximizing the expected present value of the total surplus of timber production, both in the presence and in the absence of genetically improved regeneration materials. The supply functions are then used to estimate the expected present values of the total surplus in different cases through simulation. These estimates enable us to assess the direct effect and the effect of changing harvest behavior on the expected present value of the total surplus. The main results of the study are (i) the presence of genetically improved regeneration materials has significant impacts on the aggregate timber supply function; (ii) the application of genetically improved regeneration materials leads to a significant increase in the expected present value of the total surplus; and (iii) a considerable proportion of the welfare gain results from the change in harvest behavior. A conclusion we draw from this study is that ignoring the influences of technological and policy changes on behavior can lead to significantly biased welfare estimates. We view the model as a potential approach to conducting counterfactual policy comparisons in economics without forward-looking data.