Welfare effects of forestry best management practices in the United States

State forestry best management practice (BMP) programs have been widely developed and implemented to prevent nonpoint source water pollution in the past three decades. The unanswered question is how forestry BMPs have affected the welfare positions of consumers, mills, loggers, and forest landowners. A Muth-type equilibrium displacement model was constructed to examine welfare changes of these stakeholders. The model considered a two-stage vertical production system with variable proportion production technology and imperfect market structure. Industrial mills experienced little welfare loss from forestry BMP regulation. Consumers had the largest absolute welfare loss, and loggers had the largest relative welfare loss in the base scenario. The supply elasticity of harvesting services had the greatest impact on the relative incidence of welfare losses between landowners and loggers, and in the long run their welfare losses were comparable. These results may help to improve future state forestry BMP guidelines and design incentive systems for increasing implementation rates.