Modelling non-industrial private forest landowners’ strategic decision making by using logistic regression and neural networks: Case of predicting the choice of forest taxation basis.

Abstract

In this study, logistic regression and neural networks were used to predict non-industrial private forests (NIPF) landowners’ choice of forest taxation basis. The main frame of reference of the study was the Finnish capital taxation reform of 1993. As a consequence of the reform, landowners were required to choose whether to be taxed according to site-productivity or realized-income during the coming transition period of thirteen years. The most important factor affecting the landowners’ choice of taxation basis was the harvest rate during the transition period, i.e. the chosen timber management strategy. Furthermore, the estimated personal marginal tax rate and the intention to cut timber during next three years affected the choice. The descriptive landowner variables did not have any marked effect on the choice of forest taxation basis. On average, logistic regression predicted 71% of the choices correctly; the corresponding figure for neural networks was 63%. In both methods, the choice of site-productivity taxation was predicted more accurately than the choice of realized-income taxation. An increase in the number of model variable did not significantly improve the results of neural networks and logistic regression.