The pure market allocation of land between forestry and agriculture

Presented in the paper is an analysis of the pure land allocation when a land use change affects the prices paid for goods and production factors in different ways. Three different models are presented: a fully open economy, a closed economy and an economy where selected prices are exogenously determined. The reaction in terms of land allocation occurs in an intuitive manner only in the case of certain market conditions. In more complex situations, no general prediction of the land use change is possible. The introduction of policy programmes to boost forestry has different effects in open and partially open economies. Therefore, the different channels by which the prices of goods and factors determine the allocation of land are identified. This approach allows for the formulation of specifications permitting a grouping of economies with different market structures into classes with equal land allocation patterns.