Optimal Timber Rotation on Multiple Stands with an Asymmetric Externality

Motivated by the logging ban in China and its future deregulation strategy, this paper theoretically examines the dynamic problem of forest management with spatial externality. I construct a theoretical, spatially-explicit model of a forest planner who maximizes timber profits from infinite timber rotation on all stands minus the costs of water runoff, and more importantly, asymmetric depending on the relative location of the stand. The model examines a spatial model of two stands, where the age of one stand affects the cost of the other stand, but asymmetrically. Using specific functional forms, I examine the properties of spatial and temporal substitutability between the two stands and the marginal value of staggering harvesting on one stand. The simulation results illustrate the efficiency gains of a spatial, subadditive model versus an aspatial, additive model