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Production and cost in the US paper and paperboard industry

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  • Patrick McCarthy
  • Aselia Urmanbetova

Abstract

The US paper and paperboard industry has experienced significant structural changes over the past 25 years, including reductions in the number of mills, lower rates of capacity growth, employment cutbacks and a loss of market share to foreign competitors. These structural shifts portray an industry that increasingly has difficulty adapting to a more competitive global environment. Based on aggregate data from 1965 to 1996, this article estimates a short-run translog (TL) cost function for the industry. The estimated model fits the data well and all sample points satisfy monotonicity and concavity conditions at all points. Among the findings, the industry operates at slightly increasing returns to capital utilization and labour and energy are Allen-Uzawa complements but Morishima substitutes in production. Technological progress generated 0.02% reduction in annual operating costs and consistent with an ailing US industry, estimated marginal costs approximated average operating costs until 1982 after which marginal costs significantly diverged from average operating costs.

Suggested Citation

  • Patrick McCarthy & Aselia Urmanbetova, 2011. "Production and cost in the US paper and paperboard industry," Applied Economics, Taylor & Francis Journals, vol. 43(22), pages 2883-2893.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:22:p:2883-2893
    DOI: 10.1080/00036840802599883
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    References listed on IDEAS

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    1. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, September.
    2. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    3. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
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    Cited by:

    1. Mansikkasalo, Anna & Lundmark, Robert & Söderholm, Patrik, 2014. "Market behavior and policy in the recycled paper industry: A critical survey of price elasticity research," Forest Policy and Economics, Elsevier, vol. 38(C), pages 17-29.
    2. Silva, Bruno Kanieski & Cubbage, Frederick W. & Gonzalez, Ronalds & Abt, Robert C., 2019. "Assessing market power in the U.S. pulp and paper industry," Forest Policy and Economics, Elsevier, vol. 102(C), pages 138-150.

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