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We develop fully flexible, semi-parametric models of price linkages in spatially distinct regional US markets for plywood and lumber products. The models are developed within the framework of generalized additive models (GAM) which are estimated using penalized maximum likelihood estimation methods and generalized cross-validation techniques. Such nonlinear models are a natural extension to an extensive literature that has developed increasingly flexible models of the Law of One Price and spatial market integration. The GAM estimates and marginal responses to price changes exhibit substantial nonlinearities. Dynamic impulse responses demonstrate significant asymmetries in price responses to exogenous shocks. The results are largely consistent with efficiently linked regional markets for lumber and plywood products in that price transmission elasticities are generally close to unity and localized market shocks evoke equilibrating adjustments in regional markets.

Renewable natural resources that have biological constraints on reproduction and are open-access may be subjected to intense harvest activity that limits regeneration, potentially leading to a backward-bending long-run supply curve. Empirical evidence of such supply abnormalities has been found for some open-access fish species but not yet for non-timber forest products (NTFPs). We describe the theory of the backward-bending long-run supply and how such a supply relationship could produce multiple market equilibria, affecting regulatory outcomes. An empirical example is provided to test the theory in the case of wild American ginseng (Panax quinquefolius), which has been subjected to habitat loss and harvest pressure since the 18th Century and now has its exports regulated. We find evidence that quantities supplied are negatively related to price in the long run, indicating that harvest pressure is restricting wild ginseng harvestable stocks. Also, we find that a federal regulation banning exports of roots from plants under five years old, in effect since 1999, coincided with a reduction of supply. This result could be due to the slow natural rate of population recovery.

This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.

The United States’ shares of global industrial roundwood production and derivative products have declined precipitously since the 1990s. We evaluate the extent of these declines compared with those of major producing countries from 1961 to 2013. We find that the US global share of industrial roundwood peaked at 28% in 1999 but by 2013 was at 17%, with the decline attributable to a combination of cyclical factors and long-run trends. Wood products output declines are linked to low construction levels, whereas paper’s decline is connected to the offshoring of US manufacturing and growth in electronic media. Prospects are for increased use of wood in construction as the housing market returns to long-run averages in the coming years. However, the paper sector is unlikely to recover to its 1990s levels of output, implying that it is unlikely that the United States will return to its historical highs in global market share of industrial roundwood production.

Downscaled climate projections need to be linked to downscaled projections of population and economic growth to fully develop implications for land, natural resources, and ecosystems for future scenarios. We develop an empirical spatiotemporal approach for jointly projecting population and income at the county scale in the United States that is consistent with neoclassical economic growth theory and overlapping labor markets and that accounts for labor migration and spatial spillovers. Downscaled projections generated for the five Shared Socioeconomic Pathways used to support global scenario analysis generally show growth focused around relatively few centers especially in the southeast and western regions, with some areas in the Midwest and northeast experiencing population declines. Results are consistent with economic growth theory and with historical trends in population change and convergence of per capita personal income across US counties.

The Lacey Act of 1900 was amended on May 22, 2008, to prohibit the import of illegally sourced plant materials and products manufactured from them into the United States and its territories, and to similarly ban their interstate transport. Trade theory suggests that the effect of the new law would be to reduce the flow of illegally sourced fiber into the United States, increasing prices. Monthly U.S. import data on tropical lumber (January 1989–June 2013) and hardwood plywood (January 1996–June 2013) quantity and unit value were used to estimate alternative statistical models that quantify the impact of the 2008 Lacey Act Amendment on import prices and import quantities of products from potential source countries. Results show that the Amendment's quantity effects are generally negative and double in magnitude in percentage terms than the price effects, consistent with expectations of the effects of a backwards shift in foreign supply against an elastic import demand. Models indicate that there have been double-digit percentage increases in prices and decreases in quantities of tropical lumber imports from Bolivia, Brazil, Indonesia, Malaysia, and Peru. Similarly large changes in hardwood plywood import prices and quantities from Brazil, Indonesia, and Malaysia have occurred, while smaller, and in some cases statistically insignificant, changes have been observed for hardwood plywood imports from China, Ecuador, and Taiwan.

In this study we demonstrate how the notion of diversification can be used in broad-scale resource allocation for surveillance of invasive species. We consider the problem of short-term surveillance for an invasive species in a geographical environment. We find the optimal allocation of surveillance resources among multiple geographical subdivisions via application of a classical portfolio framework, which allocates investments among multiple financial asset types with uncertain returns in a portfolio that maximizes the performance and, by meeting the desired diversification targets, protects against errors in estimating the portfolio's performance. We illustrate the approach with a case study that applies a spatial transmission model to assess the risk of spread of the emerald ash borer (EAB), a significant pest in North America, with infested firewood that may be carried by visitors to campground facilities in central Canada. Adding the diversification objective yields an expected survey performance that is comparable with undiversified optimal allocation, but more importantly, makes the geographical distribution of survey priorities less subject to possible errors in the spread rate estimates. Overall, diversification of pest surveillance can be viewed as a viable short-term strategy for hedging against uncertainty in expert- and model-based assessments of pest invasion risk.

We assess exchange rate pass-through (ERPT) for U.S. and Canadian prices for oriented strand board (OSB), a structural wood panel product used extensively in U.S. residential construction. Because of its prominence in construction and international trade, OSB markets are likely sensitive to general economic conditions. In keeping with recent research, we examine regime-specific ERPT effects; we use a smooth transition vector error correction model. We also consider ERPT asymmetries associated with a measure of general macroeconomic activity. Our results indicate that during expansionary periods ERPT is modest, but during downturns, ERPT effects are larger. USDA-USFS [SRS 09-CA-11330143-023] Published version This research has been supported by USDA-USFS Cooperative Agreement No. SRS 09-CA-11330143-023. We appreciate the helpful comments provided by an anonymous referee and by seminar participants at the International Conference of Agricultural Economists in Vancouver, Canada, August 2018. Authors names appear in alphabetical order - senior authorship is shared. Public domain – authored by a U.S. government employee

Controlling wildfire suppression expenditures has become a major public policy concern in the United States. However, most policy remedies have focused on the biophysical determinants of suppression costs: fuel loads and weather, for example. We show that two non-biophysical variables—newspaper coverage and political pressure—have a significant effect on wildfire suppression costs. Hausman tests showed that newspaper coverage and fire size were endogenous, so regression models were estimated using two-stage least squares. We suggest a number of non-biophysical policy remedies that may be able to reduce wildfire suppression expenditures more cost-effectively than traditional biophysical remedies such as fuel management.

Price dynamics for North American oriented strand board (OSB) markets are examined. The role of transactions costs are explored vis-a-vis the law of one price. Weekly data, February 3rd, 1995 through October 9th, 2009, are used in the analysis. Nonlinearities induced by unobservable transactions costs are modeled by estimating Time-Varying Smooth Transition Autoregressions (TV-STARs). Results indicate that nonlinearity and structural change are important features of these markets; price parity relationships implied by economic theory are generally supported by the estimated models. Implications for the efficiency of spatial market linkages and the dynamics associated with price adjustments are also examined.

article i nfo a bstract We describe a two-stage model of global log and chip markets that evaluates the spatial and temporal economic effects of government-subsidized fire-related mechanical fuel treatment programs in the U.S. West and South. The first stage is a goal program that allocates subsidies according to fire risk and location priorities, given a budget and a feasible, market-clearing market solution. The second stage is a quadratic welfare maximization spatial equilibrium model of individual State and global product markets, subject to the fuel treatment allocation. Results show that the program enhances timber market welfare in regions where treatments occur and globally but has an overall negative economic impact, once fuel treatment program costs are included. The overall cost of a mechanical fuel treatment program, when considering timber market welfare, transport costs, treatment costs, and timber receipts, exceeds $1000 per acre, implying that the long run fire effects and ecosystem net benefits of a treatment programwould need to exceed this figure in order to justify widespread implementation. Published by Elsevier B.V.

We developed a model of interrelated timber markets in the U.S. West to assess the impacts of large-scale fuel reduction programs on these markets, and concomitant effects of the market on the fuel reduction programs. The linear programming spatial equilibrium model allows inter- state and international trade with western Canada and the rest of the world, while accounting for price effects of intro- ducing softwood logs to the market. The model maximizes area treated, given fire regime-condition class priorities, max- imum increases in softwood processing capacity, maximum rates of annual treatments, prohibitions on exports of U.S. and Canadian softwood logs from public lands and a fixed annual treatment budget. Results show that the loss to U.S. private timber producers is less than the gains for timber consumers (mills). Effects on Canadian private producers and Canadian timber consumers depend on wildland-urban interface con- straints and condition class treatment priorities. States re- ceiving the greatest amount of treatments include California, Oregon, Washington and New Mexico, due to their concen- tration of stands with relatively low treatment costs.

Different harvest timing models make different assumptions about timber price behavior. Those seeking to optimize harvest timing are thus first faced with a decision regarding which assumption of price behavior is appropriate for their market, particularly regarding the presence of a unit root in the timber price time series. Unfortunately for landowners and investors, the literature provides conflicting guidance on this subject. One source for the ambiguous results of unit root tests of timber prices may involve data problems. We used Monte Carlo simulations to show that aggregating observations below their observed rate resulted in similar power reductions and empirical size distortions across three classes of unit root tests. Moving-average error structures can also affect power and sizes of tests on period-averaged data. Such error structures can also be created by the kind of temporal averaging common in reported timber prices. If we take timber prices at their face value and therefore ignore these sampling error and temporal aggregation complications, we find that unit root tests on southern timber prices support a unit root in 158 out of 208 product-deflation combinations tested, random walks in 38 of the series found to be nonsta-tionary, and stationarity in none. However, if we recognize temporal aggregation errors, unit root tests more commonly favor stationarity, especially for pulpwood stumpage. Because price trends for sawtimber and pulpwood products may behave differently even in the same region, stochastic harvest timing models must be developed that allow their multiple products to follow different price paths.

Making input decisions under climate uncertainty often involves two-stage methods that use expensive and opaque transfer functions. This article describes an alternative, single-stage approach to such decisions using forecasting methods. The example shown is for preseason fire suppression resource contracting decisions faced by the United States Forest Service. Two-stage decision tools have been developed for these decisions, and we compare the expected gains to the agency, in terms of reduced personnel costs, of the single-stage model over the two-stage model, existing hiring decisions, and decisions that would have been made given perfect foresight about wildfire activity. Our analysis demonstrates the potential gains to versions of our single-stage model over existing hiring decisions, equivalent to a benefit-cost ratio of 22. The research also identified additional gains accruing from imposing biases on the single-stage model, associated with asymmetric penalties from contracting decisions. Copyright 2008, Oxford University Press.

We assessed the impact on the world forest sector of reducing the risk of exotic pest spread by curtailing the roundwood trade. The analysis compared predictions from 2006 to 2015, with and without a gradual ban of roundwood exports between 2006 and 2010. With a ban on roundwood trade, world consumer expenditures for wood products and producer revenues would rise by 2.2 percent and 1.9 percent respectively. World value added would remain unchanged. However, producer revenues would decrease for the main log exporters (16 percent for the Russian Federation, and 10 percent for New Zealand). Value added would decrease most for the main log importers (13 percent in Japan, 7 percent in Korea, and 4 percent in China). Although the global cost of banning roundwood trade seems modest compared to the cost of catastrophic pest invasions, its varying effects on countries must be taken into account in forging equitable policies. SUMMARY

Asian gypsy and nun moth introductions into the United States, possibly arriving on imported Siberian coniferous logs, threaten domestic forests and product markets and could have global market consequences. We simulate, using the Global Forest Products Model (a spatial equilibrium model of the world forest sector), the consequences under current policies of a widespread, successful pest invasion, and of plausible trading partner responses to the successful invasion. We find that trade liberalization would have a negligible effect on U.S. imports of Siberian logs and, consequently, on the risk of a pest invasion. But, if it happened, possibly through trade in other commodities, a successful and widespread pest invasion would have large effects on producers and consumers over the period 2002 to 2030.

The literature on informational efficiency of southern timber markets conflicts. Part of this conflict is because of differences in how efficiency was tested. In this paper, price behavior tests are based on deflated ("real") southern pine (Pinus spp.) sawtimber stumpage prices, using some of the same data and tests used in previous research and some new data and tests. Here, different results are found in many cases regarding price behavior, as compared with the existing literature. Using a valid and consistent data-based model selection procedure, augmented Dickey–Fuller tests cannot reject a null of a unit root for most deflated monthly and all quarterly southern pine timber price series evaluated. Regressions of long-term deflated timber price ratios on their own lags lead to results similar to those offered by other authors when not corrected for bias but produce fewer similarities when bias is addressed. The results of those regressions support a contention that most of the monthly series contain nonstationary as well as stationary components and that quarterly prices tested in this framework using data through 2001 are closer to pure nonstationary processes. These results have implications for harvest timing approaches that depend on serial dependence of timber prices, provide support for certain kinds of policy and catastrophic shocks modeling procedures, and address the validity of statistical approaches best suited to evaluating interconnections among timber markets.

Catastrophic shocks to existing stocks of a renewable resource can cause long-run price shifts. With timber, these long-run price shifts may be accompanied by a short-run price drop due to salvage. Hurricane Hugo damaged 20% of southern pine timber in the South Carolina Coastal Plain in 1989. To estimate the short- and long-run effects of the hurricane on the prices of timber stocks, we estimated an intervention model of the residuals of cointegration of South Carolina sawtimber and pulpwood stumpage prices with prices of similar products from other regions. Modeling revealed a 30% negative price spike due to salvage and a long-run enhancement effect, leading to prices that are 10% to 30% higher than they would have been had Hugo not occurred. Copyright 2000, Oxford University Press.

A common popular assertion is that trade liberalization encourages deforestation. But whether this is true depends on how trade policies affect the allocation of land among competing uses and how they influence illegal cutting of public forests. A model is presented that allows for forests to be either public or private, and public forests are divided into protected (or managed) and threatened categories. Effects of price changes are shown on each part of the forest. An empirical version of the model is applied to the case of Mexico with NAFTA. Most scenarios considered show that NAFTA will have positive long-run effects on forest cover in Mexico but that this is net of losses on private lands.

Forest product markets are an important part of rural economies of the U.S. South, but recent changes in timber markets have raised questions about the future. Several factors have altered forest products markets since the late 1990s, including industry consolidations and associated changes in land ownership, changes in domestic consumption patterns and international trade patterns, and depreciation and closure of older processing facilities. The focus of this assessment of timber markets is on understanding how these and other demand and supply factors have affected the markets for various timber products. Our findings suggest that the demand for domestically produced timber products has declined somewhat in the United States, as domestic demands as well as exports have fallen. At the same time, the supply of domestically produced timber products has continued to expand since the late 1990s. The net result of these demand and supply changes may be (a) a decline in timber product output and (b) a disproportionately strong decline in associated prices. An evaluation of investment of wood products firms in manufacturing capacity within the region provides insights into future production potential. Paper production capacity has declined since the late 1990s, while lumber production capacity has remained near 1990s levels. Indications are, therefore, that demand for pulpwood to produce paper may not rebound to late 1990s levels in the foreseeable future. However, persistent low prices for softwood pulpwood could indicate long-term opportunities for the manufacture of other products from this product class. Long-term demand for solid wood products appears strong, signaling that a relatively favorable investment climate should exist in this part of the forest sector.

The traditional Faustmann (1849) model has served as the foundation of economic theory of the firm for the forestry production process. Since its introduction over 150 years ago, many variations of the Faustmann have been developed which relax certain assumptions of the traditional model, including constant prices, risk neutrality, zero production and management costs, and the single management objective. We describe the traditional Faustmann and provide an overview of the neotraditional Faustmann and Hartman (1976) models. We then use the neotraditional Hartman model to develop testable hypotheses regarding harvest response to timber, land, and amenity values from forests. Using data from the North Carolina coastal plain, we test for inclusion of several often omitted variables in models of industrial and nonindustrial harvest behavior.

Perfect competition has long been the standard by which economists have judged the market’s ability to achieve an efficient social outcome. The competitive process, unfettered by the imperfections discussed below, forges an outcome in which goods and services are produced at their lowest possible cost, and market equilibrium is achieved at the point at which the cost of the last unit supplied just equals its value in use to the demander. This point maximizes the amount of utility that consumers obtain and the profit that producers procure through the existence of the market. Therein lies the appeal of perfect competitive markets.

To estimate the financial performance of a natural mixed species and mixed-age management in the loblolly-pine forest type, we examined 991 FIA plots in the south central states. The plots were of the loblolly pine forest type, mixed-age, and had been regenerated naturally. We gauged the financial performance of each plot from the equivalent annual income (EAI) produced by growth and harvest, between two successive inventories. The real price EAI (REAI) measured the financial performance based on the real price change, net of inflation, between surveys. The constant price EAI (CEAI) measured stand productivity at prices at the time of the first survey. Thus, the REAI is a measure of real economic performance, including timber growth and price changes. In contrast, the CEAI is a quantity index of timber growth, the growth of each product being weighted by its price. During the period 1977–1994, the main determinant of the REAI was the price change. Due to an overall favorable price trend, the mean REAI ($158 ha−1 year−1) was much greater than the mean CEAI ($24 ha−1 year−1). Due to increasing prices, the best performing plots had very high stocking levels. Thus, the best financial strategy was to hold the stock, making the opportunity cost of conservation negative. Instead, CEAI tended to be lower on stands with high basal area, and higher in stands with many trees, a low share of hardwoods, and many trees near sawtimber size.