Optimal rate of paper recycling

- I use a dynamic land allocation model combined to the infinite rotation problem.
- I derive the equilibrium area of forest and cutting time under social management.
- I determine the recycling rate that maximizes the long run forest area.
- The optimal recycling rate also maximizes the social net benefit.
- I quantify the impact of recycling on: the forest area, the social net benefit, the volume of wood harvested.

This paper uses a dynamic land allocation model combined with the infinite rotation problem to determine theoretically, the recycling rate that maximizes the forest area and, thus, the number of trees under social management thereby integrating both positive externalities generated by the forest and social costs of not recycling. The results suggest that, when the recycling rate is low, increasing it to its optimal level will result in more land area being devoted to forestry and, thus, more trees. However, increasing it beyond its optimal level will reduce the number of trees in the long run. In addition, the recycling rate that maximizes the forest area is optimal in the sense that it also maximizes the social net benefit. An application shows that increasing the recycling rate up to its optimal level considerably increases the forest area. The increase in the social net benefit is very small.