Introducing Forest Access Cost Functions into a General Equilibrium Model

The purpose of this Research Memorandum is to propose an approach to incorporating forest access cost functions into global general equilibrium models such as GTAP. Towards this end, we develop a long run access cost function which can be calibrated to national data on total forest land, currently inaccessible forest land, forest land rents, and expected rates of return on investment. This is illustrated for an 11 region aggregation of the GTAP-AEZ data base. We find that this long run function generates far too high a rate of annual access, and so we introduce a short run component which introduces a quadratic term into the cost function. This can be chosen to target current rates of forest access as reported by the FAO. Finally, we discuss the treatment of this new type of investment in the general equilibrium model.