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Market structure for three major groups of Ontario and Canadian forest products industry was examined over the years 1975–1980 and 1965–1980, respectively, in terms of domestic seller concentration ratios. The analysis indicated that forest industries in Ontario are more or less a homogeneous part of those in Canada. However, patterns of change in concentration over time in both jurisdictions are different. Lumber industry in Ontario as well as in Canada, though not very competitive, is certainly unconcentrated. The pulp and paper industry, on the other hand, is mildly oligopolistic in both jurisdictions. The relatively small veneer and plywood industry is mildly oligopolistic in Ontario, but strongly so in Canada. Profitability of forest industries in Canada is positively and significantly related to the proportion of output exported and to the degree of domestic seller concentration. This degree of concentration, in turn, seems to be largely determined by the presence of economies of scale.

Price equations for the following product groupings of the Canadian pulp and paper industry were estimated using data from 1955 to 1981: (i) woodpulp; (ii) newsprint; (iii) "other paper and paperboard"; and (iv) "aggregate paper and paperboard," which includes (ii) and (iii). Price equations were formed on the assumption that firms markup average costs of production to set prices. These equations show the effects of factor costs, economies of scale, and technological progress on the prices of the products. They also help understand relevant aspects of production processes. Newsprint and "other paper and paperboard" production costs and prices are most responsive to the prices of material (woodpulp), labour, and energy, while woodpulp price responds more to the prices of pulpwood and energy. Substantial economies of scale are experienced by newsprint and woodpulp sectors. Such economies in the "other paper and board" sector are nonexistent. Technological progress has also contributed to reduction in the costs of production: 4.3% in woodpulp, 4.4% in "other paper and board," and 2.6% in newsprint per annum. Reduction in the cost of obtaining pulpwood to woodpulp sector is important in reducing the cost of paper and paperboard production. Substitution of existing capital with low energy and labour using capital is also required to lower the costs. Also, efforts to modernize the whole industry and the use of available economies of scale are indicated to keep the Canadian pulp and paper industry competitive in world markets.

Derived demand for roundwood created by the three major forest-products industries in Ontario from 1952 to 1980 was estimated from the production functions of the industries. The Cobb–Douglas function represents the lumber and the veneer and plywood industries, and the constant elasticity of substitution (CES) function represents the pulp and paper industry. In all three industries, the derived demand for roundwood is price inelastic. A theorem that the sum of partial price elasticities of derived demand when output of the final product is held constant is equal to zero has been proved. Demand by the lumber industry showed regular fluctuations throughout the 29-year period of study, while that by the other two industries rose steadily except for a few slumps.

An interrelated factor demand approach was used to study the long-term productivity of and demand for inputs in the Canadian lumber industry covering the period of 1955 to 1982. The long-run, least-cost amounts of labour, capital, roundwood, and energy were obtained by imbedding a cross-stock adjustment process in the share equations of the translog cost function. These least-cost amounts, from which the short-run adjustments were removed, were then used to obtain the long-run productivity of each input. The percentage deviations of the observed amounts of each input from their least-cost levels were computed to determine the degrees of allocative inefficiencies with respect to the individual inputs. Similar deviations of the observed productivity and real total factor costs from their long-run levels were also computed. The results indicated that (i) factor demands in the Canadian lumber industry are actually interrelated, i.e., a disequilibrium in the demand for an input creates compensating adjustments in the demand for other inputs; (ii) there are economies of scale in production of lumber in Canada, but technological progress is unobservable; (iii) simulation of the actual and the least-cost paths of factor utilizations indicated substantial misallocation of each input over major parts of the sample years; (iv) the observed labour productivity increased at the rate of 2.9% per annum while, net of short-run conditions, the rate was 3.7% per annum over the sample period; and (v) productivities of other three inputs declined both on the observed and the long-run productivity paths, but such declines were relatively slower on the long-run paths.