A Dynamic Cost and Factor Demand Analysis for the Pacific Northwest Lumber and Plywood Industries

Authors: Merrifield, David E.; Singleton, William R.

Source: Forest Science, Volume 32, Number 1, 1 March 1986 , pp. 220-233(14)

Publisher: Society of American Foresters

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Abstract:

A dynamic capital adjustment model is used to describe the Pacific Northwest lumber and plywood industries. The industries' derived demand for stumpage, labor, and capital inputs along with the behavior of costs over output levels are assumed dependent on the quasi-fixed nature of industry capital. Results obtained from data over the period 1954-80 suggest that own and cross-price elasticities of derived demand generally increase as the industries adjust towards long-run desired capital levels. Measures of short, intermediate, and long-run input requirement elasticities revealed relatively constant proportions of stumpage requirements to output levels in both industries, relatively constant proportions of labor to output in the plywood industry, yet relatively volatile employment levels in the Pacific Northwest lumber industry over the long run. Further, adjustments in capital levels appear to have had only a limited effect on the behavior of production costs in the two industries. Forest Sci. 32:220-233.

Keywords: Production and cost functions; capital adjustments; derived demand; input substitution; short-run/long-run analysis

Document Type: Journal article

Affiliations: 1: Associate Professor of Accounting, Western Washington University, Bellingham, WA 98225

Publication date: 1986-03-01

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