A Ricardian Model of Forestry

This paper provides a continuous-time “Ricardian” model of forestry where, in response to an increase in timber demand, forest cultivation is progressively intensified on the most fertile lands and/or extended to less fertile qualities of lands. It is shown that, at a given level of the rate of interest, a set of “break-through timber prices” gives the order of fertility (i.e., the order in which the different qualities of land are taken into cultivation) and that, for each land, prices of standing trees are positive above a “threshold timber price”. Since, for each land, the break-through price is higher than the threshold price, Ricardo is shown to be right: a higher demand for timber could simply raise those components of the landlord compensation which are not rent.