Contents lists available at ScienceDirect Ecological Economics journal homepage: www.elsevier.com/locate/ecolecon Analysis Are Ecosystem Services Complementary or Competitive? An Econometric Analysis of Cost Functions of Private Forests in Vietnam Cosmas Kombat Lambini a,b, ⁎ , Trung Thanh Nguyen c , Jens Abildtrup d , Van Dien Pham e , John Tenhunen a , Serge Garcia d a Bayreuth Centre for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany b Bayreuth Graduate School of Mathematical and Natural Sciences (BayNAT), University of Bayreuth, 95440 Bayreuth, Germany. c Institute for Environmental Economics and World Trade, Leibniz University of Hannover, Königsworther Platz 1, 30167 Hannover, Germany d Bureau d'Economie Théorique et Appliquée (BETA), 14 rue Girardet - CS 14216, 54042 Nancy Cedex, France e Department of Silviculture, Forestry University, Hanoi, Viet Nam ARTICLE INFO Keywords: Forest ecosystem service Trade-off Marginal cost Translog cost function Cost complementarity Vietnam ABSTRACT Forest ecosystem service (FES) provisioning and management in Vietnam is a priority in the Vietnamese en- vironmental agenda. The main rationale of private forest management is to maximise profits from timber and non-timber forest product (NTFP) production. From a social point of view an under-supply of positive forest externalities (or non-marketed ecosystem services) exists. This paper therefore contributes to the ecosystem service (ES) literature by assessing the production cost structure, in other words, the cost of marketed production and provision of carbon and biodiversity, based on a survey of private forest owners in Hoa Binh Province in Vietnam. The econometric analysis was carried out using a dual cost function approach to analyse the trade-off between forestry costs and ecological performance. This is, to our knowledge, the first time such an approach has been used to estimate the production relationship between marketed outputs and non-marketed ES in the forest sector. This approach appears to be appropriate for handling the multiple joint outputs of forest production and allows us to estimate marginal costs and other cost measures such as cost complementarities in the production of multiple ES. Our results indicate that there is complementarity in the provision of timber and carbon seques- tration and, consequently, policies that enhance carbon sequestration in private forests in Vietnam can be im- plemented without additional costs for the forest owner. We also found that keeping deadwood (to favour biodiversity) had no significant cost and was complementary with NTFP (also an indicator of biodiversity in our study), but could increase the marginal cost of producing timber. This means that biodiversity can be enhanced at no additional cost, provided that the quantity of deadwood does not significantly increase. 1. Introduction Forest ecosystem services (FES) play an important role in forest management and ecosystem service research, involving the con- ceptualisation of externalities, methodologies for assessment of their (physical and economic) values and the cost of their provision, as well as the design of policy instruments that regulate their supply and de- mand. FES, like carbon sequestration and biodiversity, can be seen as public goods associated with forest management. 1 In this paper, we focus on the positive externalities associated with forestland use and notably address the impact of their provision on production costs. Ecosystem services (ES) provided by forests have become increasingly important in the recent forest economics literature as a result of the multifaceted relevance of forests to society, including their global contribution to climate change protection (Costanza et al., 1997; De Groot et al., 2002). The ecological and economic benefits of these ser- vices to society are often still undervalued and the methods for valua- tion are arguably limited and incomplete. Furthermore, this field is faced with problems of defining ecological functions and services, lack of reliable data, spatial aspects and multiple scales, all of which com- plicate the assessment. Moreover, the link between biological indicators and the costs of supplying ES is still unclear. This is why the develop- ment of approaches to the estimation of the marginal cost of ES pro- vision is important. We show in this paper that the estimation of a cost function based on forest property data may be a powerful tool to ana- lyse the structure of multi-output forest production and management. https://doi.org/10.1016/j.ecolecon.2018.01.029 Received 5 October 2016; Received in revised form 23 September 2017; Accepted 22 January 2018 ⁎ Corresponding author at: Bayreuth Centre for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany. E-mail address: cosmas.lambini@bvng.org (C.K. Lambini). 1 In this paper, we use the terms ecosystem services, amenities, environmental services and externalities interchangeably. Ecological Economics 147 (2018) 343–352 0921-8009/ © 2018 Elsevier B.V. All rights reserved. T