LAND USE CHANGE FROM AGRICULTURE TO FORESTRY: A STRUCTURAL MODEL OF THE INCOME AND LEISURE CHOICES OF FARMERS

The role of forests in our environment is increasing in importance due to the multifunctional benefits forests provide to urban and rural communities in relation to climate change mitigation, water conservation and the provision of fibre for bioenergy. However, afforestation targets across Europe are not being met. Using Ireland as a case study, we try to understand why farm afforestation rates are falling, despite the availability of generous forestry subsidies. We use a novel technique to examine the afforestation participation decision using a life cycle choice methodology where we apply revealed choice methodology to afforestation for the first time. We find that the model coefficients coincide with expected economic theory relative to the utility maximisation of income, leisure and wealth (long term land value). However, we observe a cohort of farmers who do not plant forestry regardless of income derived, reflecting their preference to maintain the flexibility of the long term value of their land by continuing to farm.