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Timber Price Dynamics After a Natural Disaster: A Reappraisal

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  • Sun, Changyou

Abstract

Natural disasters such as a hurricane can result in massive timber loss in a forested region. Timber prices in the affected region can drop sharply at the beginning and then recover gradually. In this study, the determinants of timber price recovery and the magnitudes of their contributions are analyzed through a partial equilibrium displacement model. Hurricane Hugo of 1989 is used to calibrate the model for pine sawtimber and pulpwood markets separately in South Carolina, USA. The amount of timber inventory loss and intensity of salvage harvests are found to be the leading determinants behind timber price recovery, and they can explain the recovery thoroughly if the uncertainty of model inputs is also considered simultaneously. The impact of curve rotation (i.e., the change in demand or supply elasticity across the quarters) is small and hardly separable from that of model input uncertainty. A potential trade between the damaged and surrounding regions after the hurricane can be used to explain some of the price recoveries, but the amount of trade is likely to be small, especially for pulpwood.

Suggested Citation

  • Sun, Changyou, 2020. "Timber Price Dynamics After a Natural Disaster: A Reappraisal," Journal of Forest Economics, now publishers, vol. 35(4), pages 397-420, August.
    • Handle: RePEc:now:jnljfe:112.00000520
    DOI: 10.1561/112.00000520
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    Citations

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    Cited by:

    1. Félix Bastit & David W. Shanafelt & Marielle Brunette, 2023. "Stability and resilience of a forest bio-economic equilibrium under natural disturbances," Working Papers of BETA 2023-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Henderson, Jesse D. & Abt, Robert C. & Abt, Karen L. & Baker, Justin & Sheffield, Ray, 2022. "Impacts of hurricanes on forest markets and economic welfare: The case of hurricane Michael," Forest Policy and Economics, Elsevier, vol. 140(C).

    More about this item

    Keywords

    Elasticity; equilibrium displacement model; hurricane; parameter uncertainty; simulation analysis;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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