The effect of risk, time preference, and poverty on the impacts of forest tenure reform in China

Karen Anne Sullivan, University of Rhode Island

Abstract

This dissertation research examines why forest tenure reforms may not always lead to their intended effects—increased forest investment and improved livelihoods—as a result of heterogeneity in individual's preferences over time and risk. Since forest management involves dynamic decision making with uncertainty in future returns, households' forest management decisions, as well as their responses to forest tenure reforms, will depend on households': (1) preferences for income today versus the future (time preferences), and (2) attitudes towards risk (risk preferences). Furthermore, tenure reforms are often implemented in areas with high poverty rates. Those living in poverty are often assumed to have both a strong preference for income today and high levels of risk aversion, which make them less likely to make investments. Such characteristics may also hinder the intended effects of forest tenure reforms. This study uses household survey data coupled with risk and time preference field experiment data to empirically examine these issues in the context of rural China, where a forest tenure reform is being implemented in areas where the poverty rate is still high. Manuscript 1 examines how preferences over time and risk can affect households' forest management responses to strengthened forest property rights. Results indicate that in response to forest certification, more risk averse households used less labor for harvesting and more labor for applying inputs, more loss averse households used more labor for harvesting, and households with higher discount rates (i.e., impatient) used less labor for applying inputs and spent less on forest inputs. Manuscript 2 investigates the correlation between poverty and individual time and risk preferences. Results show that wealth does not have a significant effect on risk aversion or loss aversion; however, there is statistically weak evidence that households with lower wealth have higher discount rates. Manuscript 3 examines the effect of forest tenure reform on household wealth. Results indicate that increased tenure security in the form of a forest certificate increased net worth per capita, although the evidence is statistically weak. Overall this dissertation research demonstrates that households' time and risk preferences matter for forest management and responses to forest tenure reforms.^

Subject Area

Economics, Environmental|Agriculture, Forestry and Wildlife|Natural Resource Management

Recommended Citation

Karen Anne Sullivan, "The effect of risk, time preference, and poverty on the impacts of forest tenure reform in China" (2011). Dissertations and Master's Theses (Campus Access). Paper AAI3464886.
http://digitalcommons.uri.edu/dissertations/AAI3464886

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