Economics of Biological Conservation

Forest biodiversity is critical to maintaining a myriad  of forest ecosystem services and is also found to enhance forest productivity thus economic returns of timber. We use a rational expectations model of timber market to show that under certain conditions, forest biodiversity also lowers price volatility in timber market. The value of forest biodiversity can be significantly underestimated when this effect is overlooked.

REFERENCE  M. Zhou. 2019. Substitution, forest diversity, and timber market volatility. Working paper.