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The Impacts of Deregulation and Privatization on Cost Efficiency in New Zealand's Forest Industry

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In this paper, we investigate whether deregulation and privatization induced changes in cost efficiency within the New Zealand wood industry. Unlike previous work, the effects of privatization, deregulation, and removal of log export bans are compared to determine which shock had the most influence on efficiency changes. Cost efficiency is measured by estimating stochastic frontier models using the recent cost function approach, which does not suffer from the endogeneity problems associated with stochastic frontier production function estimation. The results show that cost efficiency decreased after each policy reform, but deregulation was more important in this regard than privatization. This suggests that countries with comparative advantages in wood processing, who also implement deregulation or privatization, may suffer through a short-run period of lower efficiency as the economy adjusts to higher input costs in those sectors. In New Zealand's case, the adjustments most likely affecting efficiency have been investments in new technologies, where time is required to attain maximum efficiency. The results are contrary to other studies that have predicted increased efficiency as a result of privatization. For. Sci. 46(1):40-51.
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Keywords: Stochastic frontier models; forest sector; policy reforms

Document Type: Journal Article

Publication date: 2000-02-01

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  • Important Notice: SAF's journals are now published through partnership with the Oxford University Press. Access to archived material will be available here on the Ingenta website until March 31, 2018. For new material, please access the journals via OUP's website. Note that access via Ingenta will be permanently discontinued after March 31, 2018. Members requiring support to access SAF's journals via OUP's site should contact SAF's membership department for assistance.

    Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
    Forest Science is published bimonthly in February, April, June, August, October, and December.

    2016 Impact Factor: 1.782 (Rank 17/64 in forestry)

    Average time from submission to first decision: 62.5 days*
    June 1, 2016 to Feb. 28, 2017

    Also published by SAF:
    Journal of Forestry
    Other SAF Publications
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