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Are Log Markets Competitive? Empirical Evidence and Implications for Canada-U.S. Trade in Softwood Lumber

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  • Kurt Niquidet
  • G. Cornelis van Kooten

Abstract

Under the U.S. Department of Commerce’s ‘changed circumstances’ review, it is possible that the countervail duty on Canadian lumber can be lowered if administered stumpage prices are based on transaction evidence appraisal – on actual auction data and regression analysis. The Province of British Columbia is implementing such a market-based approach to set stumpage fees, relying on timber auction data from the Small Business Forest Enterprise Program (SBFEP) and OLS regression. We employ SBFEP data to estimate a truncated regression model, comparing our estimates of stumpage fees with the OLS results. It turns out that the OLS approach is biased and likely results in overestimates of stumpage in some timber stands and underestimates in others. Further, we demonstrate that number of bidders has an important impact on bids, but that this could create even more problems for resolving the trade dispute.

Suggested Citation

  • Kurt Niquidet & G. Cornelis van Kooten, 2004. "Are Log Markets Competitive? Empirical Evidence and Implications for Canada-U.S. Trade in Softwood Lumber," Working Papers 2004-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    • Handle: RePEc:rep:wpaper:2004-04
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    References listed on IDEAS

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    1. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    2. Brannman, Lance & Klein, J Douglass & Weiss, Leonard W, 1987. "The Price Effects of Increased Competition in Auction Markets," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 24-32, February.
    3. Jeremy Bulow & Paul Klemperer, 2002. "Prices and the Winner's Curse," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 1-21, Spring.
    4. Boltz, Frederick & Douglas, R. Carter & Michael, G. Jacobson, 2002. "Shadow pricing diversity in U. S. national forests," Journal of Forest Economics, Elsevier, vol. 8(3), pages 185-197.
    5. Steer, Henry B., 1938. "Stumpage Prices of Privately Owned Timber in the United States," Technical Bulletins 166176, United States Department of Agriculture, Economic Research Service.
    6. Paarsch, Harry J., 1984. "A Monte Carlo comparison of estimators for censored regression models," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 197-213.
    7. Brannman, Lance Eric, 1996. "Potential Competition and Possible Collusion in Forest Service Timber Auctions," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 730-745, October.
    8. Hansen, Robert G, 1986. "Sealed-Bid versus Open Auctions: The Evidence," Economic Inquiry, Western Economic Association International, vol. 24(1), pages 125-142, January.
    9. Nelson, Forrest D., 1984. "Efficiency of the two-step estimator for models with endogenous sample selection," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 181-196.
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    Cited by:

    1. Raphaële Préget, 2011. "What is the cost of low participation in French Timber auctions?," Post-Print hal-00670762, HAL.
    2. R. Pr駥t & P. Waelbroeck, 2012. "What is the cost of low participation in French timber auctions?," Applied Economics, Taylor & Francis Journals, vol. 44(11), pages 1337-1346, April.

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    More about this item

    Keywords

    Canada-U.S. softwood lumber trade; truncated regression; timber auctions; public ownership of forestland;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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