This paper develops a model of a forest owner operating in an open-city environment, where the rent for
developed land is increasing concave in nearby preserved open space and is rising over time reflecting an
upward trend in households’ income. Thus, our model creates the possibility of switching from forestry to
residential use at some point in the future. In addition it allows the optimal harvest length to vary over time
even if stumpage prices and regeneration costs remain constant. Within this framework we examine how
adjacent preserved open space and alternative development constraints affect the private landowner´s
decisions.
We find that in the presence of rising income, preserved open space hastens regeneration and
conversion cuts but leads to lower density development of nearby unzoned parcels due to indirect dynamic
effects. We also find that both a binding development moratorium and a binding minimum-lot-size policy
can postpone regeneration and conversion cut dates and thus help to protect open space even if only
temporarily. However, the policies do not have the same effects on development density of converted
forestland. While the former leads to high-density development, the latter encourages low-density
development.FCT (Fundação para a Ciência e a Tecnologia
