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Title:Land conversion pace under uncertainty and irreversibility: Too fast or too slow? PDF Logo
Authors:Di Corato, Luca
Moretto, Michele
Vergalli, Sergio
Issue Date:2011
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Climate Change and Sustainable Development 84.2011
Abstract:In this paper stochastic dynamic programming is used to investigate land conversion decisions taken by a multitude of landholders under uncertainty about the value of environmental services and irreversible development. We study land conversion under competition on the market for agricultural products when voluntary and mandatory measures are combined by the Government to induce adequate participation in a conservation plan. We study the impact of uncertainty on the optimal conversion policy and discuss conversion dynamics under different policy scenarios on the basis of the relative long-run expected rate of deforestation. Interestingly, we show that uncertainty, even if it induces conversion postponement in the short-run, increases the average rate of deforestation and reduces expected time for total conversion in the long run. Finally, we illustrate our findings through some numerical simulations.
Subjects:Optimal Stopping
Deforestation
Payments for Environmental Services
Natural Resources Management
JEL:C61
D81
Q24
Q58
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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