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Modelling Bi-lateral Forest Product Trade Flows: Experiencing Vertical and Horizontal Chain Optimization

Author

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  • Craig Johnston
  • G. Cornelis van Kooten

Abstract

This paper serves to document the REPA Forest Trade Model – a global model of forest trade that consists of ten products across two horizontal layers in a vertical chain. The model includes 20 regions: Five Canadian regions (Atlantic Canada, Central Canada, Alberta, BC Interior and BC Coast), three U.S. regions (South, North and West), China, Japan, Rest of Asia, Chile, Rest of Latin America, Australia, New Zealand, Finland, Sweden, Russia, Rest of Europe, and the Rest of the World. The underlying economic theory upon which the model is built is discussed in detail; we demonstrate that changes in region-level forest management policies (e.g., related to harvests) and/or trade policies have a larger impact on income transfers among regions and agents than they have on global welfare. The objective function and constraints to the quadratic programming implementation of the model are developed, and the method used to calibrate the model to existing bilateral trade flows via positive mathematical programming is discussed. Finally, the data sources and actual data are provided, as are the corrections to shipping and handling costs needed to calibrate the model.

Suggested Citation

  • Craig Johnston & G. Cornelis van Kooten, 2014. "Modelling Bi-lateral Forest Product Trade Flows: Experiencing Vertical and Horizontal Chain Optimization," Working Papers 2014-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    • Handle: RePEc:rep:wpaper:2014-04
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    References listed on IDEAS

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    2. Heckelei, Thomas & Britz, Wolfgang & Zhang, Yinan, 2012. "Positive Mathematical Programming Approaches – Recent Developments in Literature and Applied Modelling," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(1), pages 1-16, April.
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    4. Kooten, G. Cornelis van, 2013. "Modeling Forest Trade in Logs and Lumber: Qualitative and Quantitative Analysis," Working Papers 149182, University of Victoria, Resource Economics and Policy.
    5. Bruno Henry Frahan & Jeroen Buysse & Philippe Polomé & Bruno Fernagut & Olivier Harmignie & Ludwig Lauwers & Guido Huylenbroeck & Jef Meensel, 2007. "Positive Mathematical Programming for Agricultural and Environmental Policy Analysis: Review and Practice," International Series in Operations Research & Management Science, in: Andres Weintraub & Carlos Romero & Trond Bjørndal & Rafael Epstein & Jaime Miranda (ed.), Handbook Of Operations Research In Natural Resources, chapter 0, pages 129-154, Springer.
    6. van Kooten, G. Cornelis & Johnston, Craig, 2014. "Global impacts of Russian log export restrictions and the Canada–U.S. lumber dispute: Modeling trade in logs and lumber," Forest Policy and Economics, Elsevier, vol. 39(C), pages 54-66.
    7. Xiaoguang Chen & Hayri Önal, 2012. "Modeling Agricultural Supply Response Using Mathematical Programming and Crop Mixes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 674-686.
    8. G. C. van Kooten & Henk Folmer, 2004. "Land and Forest Economics," Books, Edward Elgar Publishing, number 3466.
    9. D. L. Holley, 1970. "Location of the Softwood Plywood and Lumber Industries: A Regional Programming Analysis," Land Economics, University of Wisconsin Press, vol. 46(2), pages 127-137.
    10. Buongiorno, Joseph, 1996. "Forest sector modeling: a synthesis of econometrics, mathematical programming, and system dynamics methods," International Journal of Forecasting, Elsevier, vol. 12(3), pages 329-343, September.
    11. Paris,Quirino, 2011. "Economic Foundations of Symmetric Programming," Cambridge Books, Cambridge University Press, number 9780521123020, October.
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    13. Bruce A. McCarl, 1982. "Cropping Activities in Agricultural Sector Models: A Methodological Proposal," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(4), pages 768-772.
    14. Paris,Quirino, 2011. "Economic Foundations of Symmetric Programming," Cambridge Books, Cambridge University Press, number 9780521194723, October.
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    Citations

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    Cited by:

    1. Miguel Riviere & Sylvain Caurla & Philippe Delacote, 2020. "Evolving Integrated Models From Narrower Economic Tools : the Example of Forest Sector Models," Post-Print hal-02512330, HAL.
    2. Johnston, Craig M.T. & Parajuli, Rajan, 2017. "What's next in the U.S.-Canada softwood lumber dispute? An economic analysis of restrictive trade policy measures," Forest Policy and Economics, Elsevier, vol. 85(P1), pages 135-146.
    3. Johnston, Craig M.T. & van Kooten, G. Cornelis, 2016. "Global trade impacts of increasing Europe's bioenergy demand," Journal of Forest Economics, Elsevier, vol. 23(C), pages 27-44.
    4. Johnston, Craig M.T. & van Kooten, G. Cornelis, 2017. "Impact of inefficient quota allocation under the Canada-U.S. softwood lumber dispute: A calibrated mixed complementarity approach," Forest Policy and Economics, Elsevier, vol. 74(C), pages 71-80.

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    More about this item

    Keywords

    Forest trade modeling; vertical chains; welfare measurement; mathematical programming; model calibration;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • 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
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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