Economics of Forest Land Conversion and Fragmentation

This paper looks at the economics of conversion and fragmentation of forest land. The forestry economics literature has generally focussed on the management of a single stand for timber and non-timber forest benefits with little attention being paid to forest level land use decisions, and in particular forest stand interactions. As noted by Bowes and Krutilla (1989), the focus on a single stand may be a considerable weakness of the multiple-use forest land use models given that the provision of non-timber forest benefits, such as biodiversity storage, watershed protection and micro-climatic maintenance, often depend on the setting of a single stand within a larger forest area. If this is the case, then decisions about forest land use and allocation need to take account of the interaction between the stand and the total stock of forest land. The nature of the relationship between stand and total stock of forest land is of central importance. In this paper, we define three cases that reflect a range of typical stand-stock relationships that may arise: those being constant, diminishing and increasing marginal returns to the scale of the total forest stock. We explore the forest land use decision from the perspective of a social planner. Taking stand-total forest stock interactions effects into account has important implications for the choice of framework for the economic analysis as well as for the forest land allocation decision. This paper shows that it is not just the level of forest conversion that may be affected by taking stand-stock interactions into account, but also the spatial distribution of the remaining patches of forest land for the provision of non-timber forest benefits. The insights from this paper are particularly applicable to those tropical forest regions facing high rates of forest conversion and fragmentation. Policy implications, such as the establishment of minimum viable forest stocks, buffer zones and corridors, are discussed.