A framework for forest accounting
Many recent empirical studies have proposed a variety of forest-related adjustments to the national income accounts. The complexity of forest-economy interactions makes such adjustments prone to double-counting and other problems if they are not guided by economic theory. This paper presents a framework for making internally consistent, theoretically sound adjustments. The framework offers two broad guidelines for applied work. First, one should adjust the overall level of gross domestic product (GDP), and thus net domestic product (NDP), for household consumption of nonmarket forest amenities and nontimber products, but not for production externalities. Accounting for production externalities involves reallocating value added among different production sectors included in GDP. Second, one should adjust NDP for the net accumulation (not just depreciation) of forest-related assets, including the timber stock, the carbon stock, and land converted from forest to other uses. The framework also offers some guidance for methods to quantify values associated with these adjustments.
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